Tata Steel Wires Division (formerly Tata SSL) has seen a remarkable turnaround in its fortunes in recent times. The company was a market leader in the steel wires industry in the last decade. Its reign was only briefly interrupted, owing to a slowdown in the industry. However, it did not take long for the division to pull itself together and take charge.
In less than a year, today, it is reaping the benefits of its wisdom.
To flash back briefly, around 1991–92 the company diversified into the flat-product business. There were not many players in the market then, and it was deemed a good investment. But competition soon arose and the government levied new duty schemes. The profitability of the business became suspect as a result of these developments.
A key factor, according to Partho Sengupta, executive in-charge, Tata Steel Wires Division, that jeopardised the company’s growth was diversification and a loss of focus in its mainstay business — wires. "A lot of time, management effort and resources were diverted, as a result of which the core business got ignored. There were no investments in wires and none in technological updates either," recalls Mr Sengupta.
It was time for soul-searching and to bring on an aggressive programme of restructuring within the company. To begin with, the cold-rolling business was sold to Tata Steel. By now Tata Steel had conducted an HR restructuring exercise and the wire division was able to benefit from it.
Tata Steel’s strong processes helped the subsidiary company. "The mother company is strong in HR, sales, audit and financial systems, while we had sound backing in market research, excellent international marketing skills and a brand name. It looked as if we already had a recipe for success," says Mr Sengupta.
Following the merger with Tata Steel, the wires division gained from the parent company’s low-cost steel. Earlier, the division would run on scrap and the electricity-based steel-making unit in Tarapur. The cost of running this was very high. Hence, this process was discontinued. "Tata Steel now guaranteed the supply of high quality steel with its improved technology. We could now peg our products for the high-end market. We were capable of producing the tyre beat low relaxation pre-stress concrete (LRPC) used for high-end construction like bridges and flyovers," says Mr Sengupta.
"We could share knowledge from the research and development centre of the parent company. The wires industry does not have high profit margins to support high quality R&D over a period of time. With this support from the parent company, we were now a notch above our competitors and ready to go global."
Having re-established the core business, it was now time for the company to drive a restructuring process. "We decided to redesign the organisation from scratch, modelled on the Tata Work Levels. The organisation was de-layered and roles and responsibilities redefined. Essentially, we were now a company focused on clear deliverables." The process was initiated in June last year and by November the new setup was up and running.
Impact levels were created to underline the importance of people’s jobs. Employees were now judged according to their managerial skills and actual working knowledge. A scorecard was created to gauge every individual’s performance. Those with high managerial skills form the backbone of the organisation and are moved between departments.
"This way we could tap the experience of the past and infuse fresh energy in the present to get the organisation functioning smoothly," says Mr Sengupta. "Changes are already showing in the work culture of the organisation. The organisation has become nimbler. People are more target oriented, and we have upped sales by 30-35 per cent."
Level playing field
Having introduced organisational changes, the next step was to address competition. This had become a high-cost company owing to the unorganised backend forces. The company enjoyed a monopoly over the market once, but it gradually seemed to be vacating the market, as it could not address change. Subsequently, many premium lines were discontinued. "We now had to take a fresh look at the market."
The wire-drawing industry is not a high investment sector and, hence, does not have high entry barriers. As a result of this, over the last 20-25 years many players came into the market with very little investments.
"Most of the players were involved in backyard conversions to make a quick buck," says Mr Sengupta. "The technology of wire drawing took a beating. As a result of this, many well-known companies the world over had to shut shop. The face of the competition had totally changed. It was now up to us to restructure the market and produce efficiently. We could not play the game with existing rules and needed to build our own rules and shape the market."
The company categorised its products along the lines of technology and volume. A two-fold strategy was introduced to achieve this. The first was to leverage and invest in the products to add value to the quality steel sourced from Tata Steel. The company studied the high value products in the industry to understand what needed to be done to manufacture the same products at home. "The game now was to produce quality products efficiently, products which would compete in the international market."
A new branding exercise was brought into play. Says Mr Sengupta, "We had the backing of the Tata name and the TSSL brand to propel us forward."
In the last six to eight months, the company has built an elaborate distribution channel. Earlier the company was content to sell its products in the market, but now efforts were made to understand the grassroots consumer by observing the movement of the material. As the products were sold at a premium, middlemen cashed in on the brand name. Consumers were unaware of communication channels to source the products.
The company authorised distributors and retailers. The distributor became an extension of the company’s sales force. "They give us competitor information and tell us how the materials move. The company is already reaping the benefits. The volume sales have gone up by 50 per cent and we have hiked up the premiums considerably; we sell at about Rs4,000 higher than the competition today."
Allies in competition
Owing to the high cost of production, the company now sought to bring some of the local wire drawers, who had a good market share, into its fold. The company has entered into a long-term outsourcing programme with some of the key people in the industry.
Processes were shared and the market controlled. The company now benefited from their low cost manufacturing processes, just as it was successful in removing competition. "The local players are now an ally. We are effectively removing unstructured competition," says Mr Sengupta. The company is now sourcing 6,000 tonnes of materials by outsourcing 25 per cent of its work.
By following this model, the company started tapping the market in neighbouring countries. It has sealed a deal in Sri Lanka and plans to expand into the Asean countries in future.
It was also necessary to drive the existing machines efficiently to raise the production index. Accordingly, power guzzlers were retired. Poor maintenance of machines is related to poor manning practices at the shop floor level. "If the availability of the machines was 60-65 per cent, we wanted to drive that to 90-95 per cent, thereby becoming a facility that affects 30 per cent high profitability without any extra investment."
Shift managers are now accountable for the generation of scrap. Each worker reports the scrap he has generated at the end of the day. "Each time he registers this into the machine, he also thinks about it and is subsequently alert," says Mr Sengupta. "With the HR processes, volume, brand and outsourcing in order, the company expects a whopping rise in production percentage. The company produced 170,000 tonnes last year and this year the target is 240,000 tonnes."
Reward in reckoning
All the labour over the last year seems to be paying off now. The company has won the JRD QV Award in the recent past. Last year the company scored 480 points in the TBEM process, while this year the company crossed the 500 mark.
"We have inherited robust processes from the mother company," says Mr Sengupta. "Many of those have been perfected over the last eight months. The TBEM model ensures that we constantly refine and improve ourselves."