Kaunas University of Technology

Supply Chain Management in RINL Steel Plant

VENKAT GOUTHAM USURUPATI

Prof.LAURENCAS RASLAVIČIUS
Supervisor

KAUNAS 2021
 Table of contents

Contents
List of figures.......................................................................................................................................4
List of tables.........................................................................................................................................5
Astract..................................................................................................................................................6
Introduction..........................................................................................................................................7
Logistics:..............................................................................................................................................7
Business logistics:................................................................................................................................7
Production logistics:.............................................................................................................................7
Third-party logistics:............................................................................................................................7
methods..............................................................................................................................................13
1.1. Vizag steel plant logistics:.........................................................................................................13
1.1.1. Rail transport:.........................................................................................................................13
1.1.2. Road transport:.......................................................................................................................13
1.1.3. Seaways transport:..................................................................................................................14
1.2. Efficency in inblound steel sector logistics:..............................................................................14
1.3. Central dispatch yard (CDY):...................................................................................................16
Theory................................................................................................................................................17
1.4. (FOB) AND (CIF):....................................................................................................................17
1.4.1. (FOB).....................................................................................................................................17
1.4.2. (CIF).......................................................................................................................................18
discussion...........................................................................................................................................20
Conclusion..........................................................................................................................................21
referance.............................................................................................................................................22

2
 List of figures

pav. 1Indian steel sector.......................................................................................................................7

pav. 2(RMHP)......................................................................................................................................9
pav. 3(co&ccp).....................................................................................................................................9
pav. 4(BF).............................................................................................................................................9
pav. 5(Melting steel shop)..................................................................................................................10
pav. 6(LMMM)...................................................................................................................................10
pav. 7(Wire Rod Mill).........................................................................................................................10
pav. 8(MM&SM)................................................................................................................................11

3
 List of tables

Table 1 products from VSP [2].............................................................................................................8

Table 2 material dispatch by rail from 2015-2019............................................................................12
Table 3material dispatch by road from 2016-2019............................................................................12
Table 4expected NET sales for blooms on FOB basis.......................................................................16
Table 5 CIF export billing of wire rod...............................................................................................17

4
 Astract

Without steel, we would be unable to experience the comforts we overlook everyday life -
buildings, vehicles, aircraft, trains, etc. But steel is required to make any of the above items. Almost
every industry relies on steel, and it is impossible to function without it. The steel items created
need be delivered from the factory to clients in far-off locations. Transporting items created in any
sector used to take a long time, which has slowed down the country's economic growth. As a result,
logistics plays a critical role in the steel sector. Because of the financial crisis, the global market has
placed a high value on logistics optimization. The steel industry has shifted its focus from profit
maximization to cost reduction, and here is where logistics can make the most difference.. Internal
and external logistics have been used by the steel industry in an effort to increase efficiency and
cooperation between the two. In this way, the steel sector may benefit from the examination of best
practices. As the international economy dictates today's economic model, logistics might catch the
notion of how to thrive in harsh situations. There is no industry that does not rely on logistics for its
success. When it comes to customer satisfaction and retention, logistics has become an essential
connection between customers and manufacturers.
This work involves overall departments inside VSP, inbound and outbound logistics of VSP, and it
discribe the cost various of dispatch materials from plant to derive distination .

5
 Introduction
Industrialization has traditionally relied heavily on metals. Concering metals, steel has always been
at the top of the heap. When it comes to steel manufacturing and use as a raw material or
intermediate product, it's general knowledge that it's a sign of economic success. Steel is the pillar
of economysectors and has been since the dawn of time [1].
Logistics:

Customers' demands need the regulation of goods and information, and also energy and people,
between sites of origin and consumption. One of its more common title is (SCM). Logistics
necessitates the combining of information, inventory, storage, material handling, packaging, and
security. Logistics channel that provides significance time and location utility to total value of (Sc)

Definition: An ancient Greek word ("logos-"ratio, word, calculation, reason) is the root of our
modern word logistics.Before 1950, there was a concept of logistics, but logistical work was used in
commercial sector without official recognition. During the twentieth century's second half, the basic
notion and approach to logistics matured and developed. After World War II, many logistical ideas
were briefly disregarded because of the postwar boom in economic activity and demand for goods
[1].

Business logistics:

Everything you need to know about business logistics is included in the quality of your product
delivery and your connection with your customers. ensuring client satisfaction is of the utmost
importance in terms of company logistics, and it is our responsibility to make sure that our
customers are aware of the product's availability and its specifications.

Production logistics:

Logistical procedures are described in term. The purpose of production logistics is to ensure that
each machine and workstation receives the appropriate product in the correct quantity and quality at
the right time..

A more pressing issue is simplifying and removing non-value-adding activities to better regulate
and streamline the flow of goods and services. Existing and new facilities may both benefit from
production logistics. At an established factory, manufacturing is a dynamic process. The framework
for organizing production-related activities is upgraded for replacement and introduction of new
machines. Production logistics may be used to improve customer response and satisfaction [3].

Third-party logistics:

Companies that outsource some or all of their supply chain management to third-party logistics
providers are known. Third-party logistics providers frequently specialize in integrated operations,
6
warehousing, and transportation services that may be extended and adapted to fit the needs of their
customers based on market conditions and the demands and delivery standards for their goods'
serviceability and materials.

Steel sector logistics

pav. 1Indian steel sector [3]

Steel production is a significant in fracture and logistics dependent industry. Capacity involves
substantial direct capital costs for developing infrastructure for raw material, transport logistics, etc.
the logistics for industry have to be intensive, quicker and more efficient to take a larger traffic
load. India spends a lot more than a well-established nations on logistics activates due to low
average vehicle speed, high turnaround time and high cost and time for movement.

The materials from mines to plant requires a special attention as characterized by the poor transport
and logistics network. These constraints as result increases transportations cost and delays.
Materials like, by-products, waste and finished products play an important function determind the
efficiency and cost structure. The cost estimation for logistics is over 15% in total Indian steel.
Steel manufacturing in coming years would give a solution for logistics with massive increase in
delays and increase in cost for logistics. Infrastructure needs to develop efficiency of raw materials
transportations, fright movement for sustainability in Indian steel industry. The main infrastructure
linkages required for transportation by railway, roads and seaways.in steel sector railways are the
main transportations for iron ores and coal to the steel manufacturing and some coals are imported
from another country through seaways [3].
RINL:
An merged steel plant that is located on a shoreline is known as Rashtriya Ispat Nigam Limited
(RINL), which is also known as "Vizag Steel." Ministry of Steel's central PSU, it's one of the best
the nation's. In 1981, India's Prime Minister laid foundation stone. Following an extensive project
7
assessment, the governments agreed on a joint venture in 1979 to build the country's first integrated
steel plant to make structural and long items. steel plant that was first built with an annual
production capacity of 3.00 million tones of the molten metal, then expanded to 6.3 million tons and
is presently being redesigned to produce 7.3 million tons of the molten metal annually (final stage is
under progress) [2] [4].
VSP Technology: State – of – Art
1) 7 meters batteries for a tall coke oven with a dry quenching method
2) Blast furnaces with Paul-Worth Bell-Less top charging system
3) An all-slag cast housing for blast furnaces
4) Suppressed combustion-LD method for recovering gas
5) molten steel is poured into molds in a continuous casting process
6) “Tempcore” and “Stelmor” cooling processes in LMMM & WRM respectively

Table 1 products from VSP [2]

Main products of vsp

sno Steel products By-products other
1 Billets Coke dust Lime fines
2 Channels Coal tar Ammonium
sulphate
3 Beams Anthracene
4 Squares Hp
naphthalene
5 Flats Benzene
6 rounds Toluence
7 Re-bars Xylene
8 Wire rod Wash oil

Major Departments
1) Raw Material Handling Plant (RMHP) :To handle with the enormous quantities of raw
materials arriving from diverse sources, this facility contains sophisticated unloading,
mixing, stacking, and reclamation systems. The (BF) produces iron ore in form of molten
iron by using iron ore as one of the raw elements (BF) [5].

8
 pav. 2(RMHP) [6]

2) Coke Ovens & Coal Chemical Plant (CO & CCP): In coke ovens, coal is heated to 1000–
1050C for 16–19 hours to transform into coke. to generate heat in (BF) makes use of a
material called coke. [2]

pav. 3(co&ccp) [6]

3) Sinter Plant – Sinter is a porous mass made up of microscopic mineral particles that is used
as one of the input materials for heating in BF.
4) Blast Furnace – In a (bf), iron is a outcome of smelting iron-bearing minerals with help of
coke and other input materials. For liquid iron and Pig castings, temperatures may reach
more over 1500 degrees Celsius output of this phase.

pav. 4(BF) [6]

5) Steel Melt Shop – Oxygen is blown in iron hot metal bath in refractory lined converters in a
steel melting facility steel is produce. A reduction process are usually to make iron, while
oxidation process used to make steel.

9
 pav. 5(Melting steel shop) [6]

6) Continues casting system (CCD-To produce blooms (320mmx320mmx12m), the liquid

required to make steel is pumped through the system mentioned above. These blooms are
then utilized as raw material in other mills.
7) Light & Medium Merchant Mill(LMMM) - The final result is made up, a varoius different-
sized blooms. the finished commodities are re bars ranging in diameter from 8 to 36
millimeters and billets (125x125x12 meters) (16-80mm). They are utilized in manufacturing
of fasteners, forging, railways, and construction projects [6].

pav. 6(LMMM) [6]

8) Wire Rod Mill – Making coils of diverse wire rod shapes from billets. They come in a wide
range of diameters from 5.5 to 20 millimeters. Using these products, wire drawing machines
are created.

pav. 7(Wire Rod Mill) [6] [5]

9) Medium Merchant & Structural Mill- Billets are used to make squares and structurals, which
are then utilized in the rerolling of units, the construction of vehicle parts, and the
manufacturing process.
10
 pav. 8(MM&SM) [6] [4]

10) Traffic Department – The traffic department manages both incoming and departing traffic
(such as various raw materials) and takes on a significant role in internal and external
logistics, with 50% of goods transferred by belt conveyors, 45% via rail, and 5% via road. a
peripheral unloading system was originally introduced, VSP was the first steel company to
utilize this technology.To manage the huge amounts of traffic generated by the VSP's fleet
of 31 locomotives, 27 hot metal ladle cars, 7 torpedo ladle cars and the daily borrowing of
about 600 wagons from the Indian Railway, VSP has 5 internal rails, a loco and wagon
repair shop and weights [4].

11
 methods
1.1. Vizag steel plant logistics:

The mode of transportation are-

1) Road transport
2) Rail transport
3) Seaways transport

1.1.1. Rail transport:

Rail transportation is the movement of commodities along rails in wheeled vehicles. Rail transport
is also an essential aspect of VSP's logistics. Material is transported by rail on a daily, weekly,
monthly, quarterly, and annual basis. Material will be transported from the steel plant's various
departments to Central dispatch yard (CDY), often known as stockyards. The content will be
distributed in same manner to branch offices and consumers.

Table 2 material dispatch by rail from 2015-2019 [2]

YEARS
MILLS 2015-16 2016-2017 2017-2018 2018-2019
LMMM 12,55,625 10,83,872 14,65,753 13,36,566
MMSM 7,69,992 6,34,351 8,10,689 7,21,104
WRM 472789 4,31,043 5,90,158 5,33,947
BSY& SBM 2,10,447 1,72,840 2,50,215 2,10,382
PSY 2,40,773 2,26,129 2,77,324 3,88,417
TOTAL(year wise) 29,49,626 25,48,235 33,94,139 31,90,416
The most materials were sent by rail from LMMM in the years 2015-2019, followed by MMSM,
WRM, PSY (Polavarm stock yard), and BSY.

1.1.2. Road transport:

VSP relies substantially on road transportation for its logistics. At this site, material will be
transferred daily, monthly, quarterly, and yearly. Transport of materials from storage areas to
designated locations according with predetermined plans. Merchandise will be transported by road
to regional offices, branch offices, and individual customers. As part of its delivery, the material
will be stored at a Central dispatch yard (CDY), which is known locally as a stockyard. The
products supplied from departments to the stockyards will be handled by the Handling agency
contracted by the stockyards. As part of their duties, they are also responsible for transporting the
goods in an environmentally friendly manner[6].

Table 3material dispatch by road from 2016-2019 [5]

YEARS REGIONS TOTAL

ANDHRA EAST NORTH SOUTH WEST
2016-17 2,05,768 1,20,290 1,22,900 3,17,934 3,87,025 11,53,917

12
 2017-18 2,20,318 1,05,809 1,02,309 3,31,631 3,34074 10,94,141
2018-19 2,77,370 2,05,166 ----- 3,17,371 3,66,678 11,39,215

From 2016 to 2019, 2016-17 was the year that saw the most material sent to all five areas of the
country (Andhra, East, North, South and West). In 2018-19, the second-highest amount of materials
was sent, while the lowest amount was dispatched in 2017-18.

1.1.3. Seaways transport:

India's ports are underperforming, with a performance rating of 3.42 on a scale of 5, compared to
4.23 and 3.66 for China and Germany, respectively. Slow unloading of a shipment by Indian steel
makers shows increased costs and decrease competitiveness. The price of transportation are heavily
influenced by port activities. The construction of sea berths capable of handling huge vessels should
provide technical and financial assistance it needs, and the attention it deserves. Increasing the
cargo capacity and decreasing turnaround times need huge cape-size vessels can be mechanized.
For transportation of steel-produced commodities, seafaring and inland waterways have great
promise. This might reduce the pressure on railroads and road transportation systems by 60% to
80% by using coastal ships and interior waterways, which are yet underdeveloped [6].

1.2. Efficency in inblound steel sector logistics:

Despite the fact that we are familiar with the transportation of raw materials and completed
products by road and rail, Indian citizens are ignoring the importance of maintaining the quality of
service provided by each mode of transportation. Even though trucks and trains transport tons of
commodities every day, no one is aware of a chemical reaction taking place in the trucks or train
cars. All man-made items are susceptible to adverse effects and known this for a long period of time
. This has an impact on the cost of mechanical labor for both manufacturing and servicing. The steel
industry's economy would benefit greatly if logistics costs are reduced by 1% also . In order to save
money and improve fuel economy, Soo service recommends that truck or rail wagons be maintained
on schedule.

13
The flow diagram demonstrates how supplies were transported to different departments using road
and rail logistics, and final goods were exported using a various logistics services [5].

Raw materials transportation

through railways to stock yard

Transportation
Manganese Coal from by rail logistics
Dolomite Iron ore lumps
ore lump domestic & service
&
limestone imported

Sinter plant
for filtering Coke oven battery
the materials for making coke
Transportation
by road
logistics Goes through Rail and road
service service transportation

Hot metal will transfer BLAST

by rail service FURNACE Pig casting
machines

Steel melting shop

LMMM Wire rod MMSM STM

mill mill mill mill

Finished materials will

transfer to central dispatch
yards (CDY) by railway
service

External Global logistics

logistics

14
1.3. Central dispatch yard (CDY):

CDY for practical purposes is a shared extended shipping bay of each mill within plant premises.
The shared shipping bay facility would enable receipt, loading and handling over single point
without splitting of rakes supplied by railways. The CDY system involves the following major
activates:
a) Transferring the product from each mill to the storage area, this enables continuous
evacuation of mills to maintain the desired production levels.
b) Transporting pre-weighed according to dispatch plan to central loading yard for loading on
rail wagons, this enables in reducing in rake retention time (RRT) and increase in
availability of empty rakes.

Maintain the production levels and dispatching the materials in various logistics sector is very
sensitive and critical area in the department, if not such decisions will have direct impact on
performance of loading and unloading activities which results cost and time in various
transportation sector.
The flow diagram shows how the finished product is transferred from one logistics provider to the
next (CDY)[5][6].

Final product from steel

industries comes to CDY

Sorting and transferring the finished

product to various transportations
sector

Railway wagon Truck loading yard

loading yard

Transferring the Transferring the Transferring the

product through rail product by seaways product through
to assigned to different countries intercity road intercity
destination in the
country

15
 Theory

1.4. (FOB) AND (CIF):

The term (FOB) indicates material loading, transporting, staking at port and loading into the vessel
is responsible by RINL.
(CIF)An international shipping agreement represent the charge by the seller to cover cost, insurance
and freight while the cargo is in transit, this is only applied in goods transported by seaways. When
shipping internationally there can be risk and cost transfer points between seller and customer, since
seller pays the shipping, freight and insurance cost until the cargo arrives to the customer
destination port.

DATA [5]:
Working cost (WC) = Variable cost (VC)+ Fixed cost (FC)
Profit = Net Sales-Total cost
Cash margin =WC+ Interest
Total cost= WC+ Int+ Depreciation
Gross margin=Net sales-WC
Minimum operated price (MOP) =Delivery price-discounts
Branch level price (BLP) = SO stage price (sale order) –ED (excise duty)-Freights (Logistic by road
or rail)- Handling Charges-Discounts
This are the data of total manufacturing cost including profit. In marketing terms, the total cost will
be treated as minimium operated price (MOP) for selling, the final product sending to difrent branch
with includes fright. (BLP) of all brabch warehouse within the country or different country will
differ depending on fright charges
Based on market condition primuim will be included to (BLP) price for customer.
For example:
Sending the materials to Sri Lanka
1.4.1. (FOB)

In (FOB) I have taken 30,000 tons of blooms (150*150*12m,3SP grade), as per the international
standards price in steel industry, based on the today’s market valve the committee of RINL discuss
and remended the (FLP) per ton = 590$,

Table 4expected NET sales for blooms on FOB basis

SNO PARTICULAER EXPENSES EARNING CALCULATION/REMARKS

USD/MT USD/MT
01 Transfer price of blooms 590$/ton Agreement of sale order issued
(150*150*12mm,3SP after fixing the floor level price
grade) for 30,000tons. (FLP)
02 Proposed selling price 590$/ton
03 FOB expenses of steel (FOB) until loading in to vessel

16
 per ton
03.1 Stevedoring 9.63$/ton Handling charges in stevedore
contract scope
03.2 Third party inspection 0.76$/ton wing inspects the export
material before loading at the
berth, the inspection cost are
paid by VSP
03.3 Customs and O. T 0.066$/ton Customs and other
miscellaneous expenditure
03.4 LC confirmation 0.25$/ton LC confirmation
03.5 Total fright charges 10.69$/ton Fright charges converted in
unloading to port dollar rate
04 NET sales 579.39$/ton NET sales are described by
(selling price-total freight
charges)/ton
05 Duty Draw back 2% and 23.17$/ton This describes (NET sales of a
MEIS Scheme2% product/ 4% of total duty and
MEIS)/ton
06 Total NET sale at (VSP) 602.48$/ton Total amount of NET sales
after all the charges/ton
Therefore
The valve of blooms for 30,000 tons =18,074,400$

1.4.2. (CIF)

I have taken 100tons of wire rod,The (FLP) valve =570$, same as above the cost evaluvation has by
Marketing department of RINL
(CSA ) bidding is done through customer therfore the valve after bidding of wire rod =781.25$
Table 5 CIF export billing of wire rod

SNO PARTICULAR EXPENSES EARNING CALCULATION/REMARKS

BY BY
CUSTOMER INDUSTRY
USD/MT USD/MT
01 Transfer price of 570$ This issued after fixing the floor level price (FLP)
wire rod
coil(100tons)
02 Proposed selling 781.25$ This calculated by 1USD=160LKR
price of wire rod So (100t*781.25$=78,125$*160LRK
for(125000LKR) =125,000)
Sri Lanka
currency
03 Transportation 8.82$/ton RINL issues stevedoring contract based on the
cost from (VSP) stevedore licence, experience and registration
to port with dock labour board (DLB)
04 Ocean freight in 47.88$/ton This is calculated tender rate in LKR

17
 container (7661/160=47.88$)
insurance
05 Cess on WRC 93.75$/ton LKR15000 CESS at COLOMBO PORT
(6.0&6.5mm) (15000/160LKR=93.75$)
SAE1008grade
06 Port and aviation 50$ 570$+47.88$+
insurance of 10% (insurance&tranfer)10%=618+61.8
and LEVY of =679.8$
7.5% LEVY the total charge =679.8*7.5%=50.98$
07 NBT on 12.54% (CIF*10%+CIF) *2%=12.54$
CIF(CUSDEC)
not covetable
08 Unloading, 15.63$ Handling 2500LKR/ton
shifting to (2500/160=15.63$)
warehouse and DERIVED FROM SRI LANKA GOVT
delivering to the
customer
09 NBT @ 2% on 0.31$ Handling rate (15.63*2%=0.31$)
handling charges
10 Total expenditure 229.91$ This are the driverd expenses paid by VSP
incurred in
Colombo
11 NET sale in 551.34$ Selling price-expenditure(781.25-299.91=551.34)
Colombo (USD)
12 Duty 2% 22.01$ 4% on 551.34$ /ton, derived of GOVT as export
+MEIS2% benifit
13 Total NET sales 572.27$ Including every duty
of wire rod to
steel plant
Therefore
The final cost for wire rod from VSP to SRI lanka =57227$
This flow chart shows the logistics process from VSP to Sri Lanka.

Finished materials
dispatch from VSP

The material is loaded

Reaches to vizag
into CSA vessel by
port
RINL scope

The material will be transported to Clearing goods from

warehouse, unloading, stacking and customs at colombo
loading in customer vehicle by CSA port by CSA

Issue of sale documents by CSA and

deposit of sales proceeds in VSP
account at colombo 18
 discussion

After reading about shipping conditions in VSP, I learned that the shipper is responsible for the cost
of transportation and must pay for the cargo's insurance at the port or airport, as per the CIF terms.
However, we don't want to incur additional costs for our transportation, which includes not only
ocean fright or air fright, but also distinction charges, shipping line charges, terminal handling
charges, and invoice of lading. Because of this, it is easy to see that there are a lot of hidden costs
when comparing (FOB) and CIF) basics. All costs are pre-defined in (FOB) terms so that we may
calculate the real cost of a transportation. Our shipment is completely under our control, and we
know exactly when it will reach at our destination. negotiating ocean costs on (FOB) terms rather
than (CIF) terms is a preferable option, since under (CIF) everything is within the supplier's direct
control. For (FOB) shipments, we have the option to choose any sea fare or fright station for better
customs processing, and lower prices.

19
 Conclusion

The steel sector is able to reduce its costs, increase output, satisfy consumer demand on time, and
contribute to the nation's economic growth thanks for utilising clever marketing techniques and
technology - IT and logistics.Steel manufacturers are making substantial efforts to improve and
retain their customers by developing direct association.Supply chain reengineering, may help
organizations and sectors compete more effectively and create new revenue streams by leveraging
the power of global (Sc) and logistics. As a consequence, a global view of supply network risks is
essential for success. Smart supply chain engineering has helped firms like Amazon, Flipkart, eBay,
and Cisco, among others, become industry leaders.

The government of India (GOV) plans to build a multi-model logistics park as part of a program to
improve logistics efficiency (LEEP). They claim that these parks will reduce freight costs from 13
to 8% of the sale price.

20
 referance
[1] Dutta B.K ,Suprakash Mukherjee, Tobby Simon,Harvansh Batra(IMRC 2008),Supply Chain Risk
Management:Discussion
[2] RINL Annual Reports
[3] Supply Chain Transformation in Steel Industry, Innovation, insight drives,October, 2019.
[4] Kumar. K, Bandi .J, Tenneti .L(2019),The indian steel industry: Growth, Challenges and Digital
Diruption.
[5] RINL Marketing Department, Genaral Manager(GM), Sales.
[6] RINL Training mannual

21