Role of steel service centres in the automotive supply chain
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Role of Steel Service Centres in the Automotive Supply Chain. Abraham Stephanos Chief Operating Officer Tata Steel Processing & Distribution Limited. Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi. What do service centres do?. Inventory Holding Processing

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Role of steel service centres in the automotive supply chain

Role of Steel Service Centresin the Automotive Supply Chain

Abraham Stephanos

Chief Operating Officer

Tata Steel Processing & Distribution Limited

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


What do service centres do

What do service centres do?

  • Inventory Holding

  • Processing

  • Distribution & Logistics

  • Inventory Management Services

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Role of steel service centres in the automotive supply chain

Producers of Steel

Service Centres provide this expertise

Value Addition Need in Intermediate Services

Supply Chain Mgt Procurement

Strategic Alliances Technical Services

Stocking Processing

Customization Just - In - Time Delivery

Direct to Consumer

Final Consumer

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


The need to unlock value from the supply chain

The need to unlock value from the supply chain …

From the Customer’s Perspective

  • Traditional ‘Cutters’ provide limited value:

    • No inventory holding

    • Usually low end processing

    • Very old / reconditioned equipment

    • Quality depends on customer’s inspection

    • Highly fragmented

    • Mostly small shops with informal labor

  • Need to remove costs from the supply chain

  • Need to improve service levels in the supply chain

From the Steel Mill’s Perspective

  • Need for Steel Mills to focus on Core businesses and business processes.

  • Greater attention to Logistics and Supply Chain Management

  • Focus on Value Chain costs and efficiencies

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Led to the emergence of the organised service centre industry

…led to the emergence of the organised service centre industry

  • Growth of Auto & White Goods Segment

  • Entry of MNC’s

  • Stringent Quality Requirements

  • Tight Delivery Commitments

  • Expectation of Professional Service

  • Focus on supply chain efficiencies

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


The automotive industry has been the main catalyst for the growth of service centres

The automotive industry has been the main catalyst for the growth of service centres

1990s

G Williams, Allied

1990s

Howrah ,Belur,Shalimar cutters;

BMW

2000 – 2005

Tata Ryerson

2000 – 2005

TRF ,Tata Ryerson

2005 – 2010

Pos IDPC , Essar ,

SteeliumD’tors , TSPDL

2005 – 2010

BMW ( exp)

Steelium Distributors

  • -

  • Sumitomo , Pos IDPC ( Exp)

  • -

  • Essar

1990s

Talojacutters, Ampil, MSSCL, Tata Ryerson

1990s

Manali Cutters , Ramanasekhar Industries

2000 – 2005

Hemnil, LohaIspat

2000 – 2005

Pos Hyundai , Toyota Tsusho

2005 – 2010

Pos IPPC , Essar , ARK

SteeliumD’tors , Posh , MSSCL

2005 – 2010

Hyundai Hysco , SteeliumD’tors

Essar, JSW

  • -

  • Pos IPPC II , Essar- Indore ,

  • LohaIspat

  • -

  • Pos ICPC , Toyota Tsusho (Exp) ,

  • Pos Dighe , Kawarin

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Today we have a wide gamut of service centres from cutters to high end

Today we have a wide gamut of service centres … from ‘cutters’ to ‘high end’ …

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


With a variety of ownership models

…with a variety of ownership models

Independent

SMPC

LohaIspat

Ranka

Steel Mill Promoted

TSPDL

POSCO

Essar

Jindal

OEM Promoted

Toyota

Tsusho

Honda Trading

Hyundai Hysco

Metal Trading House Promoted

Sumitomo

Caparo Marubeni

MSSCL Metalone

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


The typical automotive steel supply chain

The typical automotive steel supply chain:

Service Centres

Tier 1 Auto Vendors

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Service centres can be categorised into stage 1 stage2 3 processors

Body in While

Assembly / Welding

Large Parts Stamping

Small Parts Stamping, Plate Fabrication

Press Blanking, TWB, Sheet Fabrication,

Inventory Mgt, IT Support, Technical Services

Slitting, P&0, Precision Levellling

CTL, Shearing

Warehousing & Debulking

Service Centres can be categorised into Stage 1 & Stage2/3 processors:

Value Creation

Technical Sophistication of Operations

Automotive Tier 1 Supplier

Stage 2 / 3 Processor

Auto

Stage 1 Processor

Home Appliance

Logistics Provider

Source: Mitsui

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Typical stage 1 processing output

Typical Stage 1 processing output:

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Typical stage 2 3 products

Typical Stage 2/3 products:

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


While stage 1 processing demand is growing in leaps and bounds

While Stage 1 processing demand is growing in leaps and bounds …

2012

2007

Steel Mills

2 Mn

3.5 Mn

Service Centres (Tolling)

Stockyards

‘Traders’

Service Centres (Distribution)

1.25 Mn

3.5 Mn

Customers

Customers

Customers

Processors & ‘Cutters’

3 Mn

4 Mn

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Role of steel service centres in the automotive supply chain

… Stage 2/3 processing is still primarily carried out by Tier 1 vendors, but new sophisticated service centres have entered the fray

2012

2007

Steel Mills

0

0

Stage 2/3 Service Centres (Tolling)

Stockyards

‘Traders’

Tier 1/ Tier 2 / Tier 3 vendors

2.3 Mn

5.1 Mn

OEM

OEM

OEM

1.9 Mn

2.4 Mn

Stage 2/3 service centres

0.2 Mn

0.6 Mn

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Stage 2 3 customer expectations are distinctly different from those of stage 1

Stage 2/3 customer expectations are distinctly different from those of Stage 1

Product Quality

Commercial Aspects

Customer Expectations

Order Execution

Customer

Care

Management

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: TSPDL research


Customer expectations product quality

Dimension

Tolerance

Delivered

Quality in

PPM

STAGE II

Yield

Internal

PPM

Complaint

Resolution

APQP/

PPAP/

FMEA

Process

Reports

Plan for

Every Part

(PFEP)

Material

Reconciliation

Customer Expectations – Product Quality

STAGE I

PRODUCT

QUALITY

Source: TSPDL research

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Role of steel service centres in the automotive supply chain

Delivery

Compliance

KANBAN

STAGE II

STAGE I

Pull-Trigger

System

Lead

Time

VIVO

“KIT”

Deliveries

Inventory

Holding

Process

Control

&

Process

Capabilities

Forecast

Based

Planning

Customer Expectations – Order Execution

ORDER

EXECUTION

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: TSPDL research


Role of steel service centres in the automotive supply chain

Price

Stability

Cost of Poor

Quality (COPQ)

STAGE I

STAGE II

Competitive

Pricing

VA / VE

Savings

Long Term

Pricing

(YOY Cost

Reduction)

Availability of

Credit

Customer Expectations – Commercial

COMMERCIAL

ASPECTS

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: TSPDL research


Role of steel service centres in the automotive supply chain

VA / VE

Projects

Accessibility

Of Concerned

Person

STAGE II

STAGE I

JIS Delivery

Timely

Resolution

Of Complaints

EVI

Advance

Intimation

Of Supplies

Growth

Aligned

With

OEM

Commitment on

Supplies

Customer Expectations – Customer Care

CUSTOMER

CARE

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: TSPDL research


Five major trends impacting global auto supply chain

Five Major Trends impacting Global Auto Supply Chain:

  • Flexible Manufacturing

    • VW produces 7 models on 3 line

    • BMW produces 4 Models 2 lines

  • Build to Order

    • BMW more than 80% of production done according to orders received from customers. SSCs/ vendors assist by providing delivery of more than 85% of orders on promised day and 95% in the same week

  • Risk Sharing

    • Investment by SSCs/ vendors in development (R&D) & expansion plans for new products

  • Outsourcing of Manufacturing

    • To reduce investment & fixed cost, globally automakers are increasing outsourcing manufacturing - related activities to specialist companies, especially in Press & body shops operations

    • Renault – Oxford Automotive supplies stampings & welded sub assemblies

      Daimler – tailored blanks for C class are supplied by ThyssenKrupp

      BMW – Tower & Magna for welded sub assemblies

  • Outsourcing Logistics

    • All major global auto manufacturers rely heavily on outsourced logistics suppliers (TNT logistics, LGI, Dana Brazil, Exel etc.)

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: Metal One


Role of steel service centres in the automotive supply chain

Indian auto sector is expected to shift towards higher usage of Cold Rolled and High-Strength steels

Steel Consumption in Auto

(Mn MT)

Grade-wise usage

2003

CAGR: 13.2%

Advanced High strength, 3%

Ultra High strength, 1%

5.2

High Strength, 34%

CAGR: 12.5%

Mild, 62%

2.8

2015

Ultra High strength, 10%

CAGR: 13.6%

Mild, 24%

Advanced High strength, 30%

High Strength, 36%

Cold rolled (CR)

Hot rolled (HR)

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source: Essar Steel presentation at Indian steel conference May 2010


The steel vehicle of the future will use several new steels and manufacturing technologies

What is New in Steel?

The steel vehicle of the future will use several new steels and manufacturing technologies:

Conventional Stamping

Laser Welded Blank

Tailor Rolled Blank

High Frequency Induction Welded Hydroformed Tubes

Laser Welded Hydroformed Tubes

Tailor Rolled Hydroformed Tubes

Hot Stamping (Direct & In-Direct)

Laser Welded Blank Quench Steel

Tailor rolled Blank Quench Steel

Roll Forming

Laser Welded Coil roll Formed

Tailor rolled Blank Roll Formed

Roll Form with Quench

Multi Walled Hydroformed Tubes

Multi Walled Tubes

Laser Welded Finalized Tubes

Laser Welded Tube Profiled Sections

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi

Source : Tata Steel


Service centres will become an integral part of the automotive supply chain in india

Service centres will become an integral part of the automotive supply chain in India

  • ‘Availability’ is still the key issue in India

    • High concentration in steel industry

    • Limited availability of grades outside general engineering and construction

  • Going forward (next 5 – 10 years)

    • Shift in focus from ‘Availability’ to ‘Service’

    • More Service Centres will enter Stage 2/3 processing area

    • Not all service centres would be able to successfully meet the customer expectations in Stage 2/3 processing

    • Macro trends in automotive industry such as flexible manufacturing, outsourced logistics, use of new materials and technologies will see emergence of dedicated automotive service centres that are closely aligned with OEMs

Indian Steel Markets 2011 Conference

15-16 March, 2011, Delhi


Thank you

Thank You


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