December 2016 | Gayatri Kamath
The business excellence endeavour at Tata Steel has helped the company evolve continuously to stay on course in an industry that has been buffeted by transformative trends
Better known as an industrial steel producer, Tata Steel India can also be categorised as a retail business. Over a third of its production — that’s roughly Rs130 billion worth of steel — goes to about 3 million small buyers through 8,500 retail outlets across the country.
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Anand Sen, president of total quality management (TQM) and the steel business at Tata Steel, says that the origin of the company’s retail business model can be traced back to the 1990s, when the company adopted the Tata Business Excellence Model (TBEM), a methodology modelled on the Malcolm Baldrige Award, a US-based quality framework. “During the TBEM assessment, a visiting Baldrige assessor set us thinking when he asked us what we were doing to develop the non-key account business, which contributed 70 percent of our revenues,” says Mr Sen.
Realising that there was an opportunity to engage directly with smaller customers, Tata Steel set up a complete dealer-distributor retail channel. The initiative transformed Tata Steel into what Mr Sen calls “one of the largest branded steel companies in the world”, with customers even willing to pay a premium for brands such as Tata Shaktee galvanised sheets and Tata Tiscon rebars.
Over the past 25 years, the focus of Tata Steel’s business philosophy has been on quality and excellence. “We realised very early on that quality, in the broadest sense of the word, was critical — not just in quality of product, but in everything we do. TBEM and TQM helped us achieve this,” says Mr Sen. Tata Steel eventually became the first Tata group company to win the JRD QV Award in 2000. In 2004, it won the Leadership in Excellence Award when the steel business crossed 700 points, a high point that no other Tata company has achieved till now. “Beyond doubt, TBEM has been one of the most important elements of the success that Tata Steel has achieved,” says Mr Sen.
Having achieved these big TBEM milestones, Tata Steel decided to train its sights on one of the most widely recognised quality awards in the world — the Japan-based Deming Prize. The Deming journey began in 2005, and led to unexpected twists. “The Deming assessors asked us a few deep questions — ‘How can you ensure that the population of Jamshedpur will not increase exponentially because of migration from underdeveloped areas? If your employees have been with you for decades, why are some of them still semi-literate or illiterate?’ These fundamental questions opened our eyes and gave us a new direction,” explains Mr Sen.
The larger landscape
As a direct result, Tata Steel’s community initiatives took on a new impetus, with a focus on socio-economic development of the underprivileged communities around Jamshedpur and other areas where it operates. The company also set out to make thousands of shop-floor workers both functionally as well as computer literate.
Embedding the tenets of excellence in a 38,000-strong employee base spread over multiple units, locations and businesses took time, but Tata Steel did it. It won the Deming Application Prize in 2008, and in 2012, it won the Deming Grand Prize, becoming the only integrated steel company outside of Japan to do so, a record it continues to hold.
Last year, Tata Steel returned to the TBEM fold after a 11-year hiatus. This time around, the company decided to apply for TBEM as an integrated organisation, as opposed to the earlier division-wise approach. Given the size and spread of the steel behemoth, this was a massive challenge, and yet the experience was smooth. Tata Steel came out shining, with a score of 657 and recognition as an industry leader.
The return to TBEM has brought about unexpected benefits, for example, picking up valuable lessons in marketing to rural consumers and bundling of products from other Tata companies such as Rallis and Tata Chemicals. Says Mr Sen, “It made sense for our product brands to collaborate, for instance, to sell pipes and wires as a bundled offering; it was a convenience to our customers and a smart way to increase sales. We have also started creating steel solutions, such as steel doors.”
The steel major also shares its own best practices with group companies, for instance, its improvement engine. At Tata Steel, the impact of the improvement engine is immense. Tata Steel tracks the value of savings achieved through TQM-based improvements — this figure has touched Rs160 billion in cumulative savings during the past decade, with Rs60 billion saved in the last two years alone. One big ongoing initiative is Shikhar 25, an attempt to achieve 25 percent EBITDA margins and to enhance the company’s market competitiveness.
Steel war rooms
The improvement focus at Tata Steel has also led to the creation of ‘impact centres’, which are permanently manned steel war rooms that tackle disruptions in business processes on a daily basis. Every division has a dedicated impact centre where members from key functions such as procurement, operations, maintenance and engineering are involved. The concept has been so effective that Tata Steel now has 12 such impact centres in the steel value chain.
It’s evident that Tata Steel’s business excellence journey is not a narrow road that leads to a few popular global benchmarks. It’s a way of life that is less about periodic upgradation and competitiveness, and more about becoming a sustainable leader in its domain.
Tata Steel's performance improvement system
|This article is part of the cover story about the culture of business excellence across Tata group companies in the October - December 2016 issue of Tata Review:|
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