Tata Steel, under its Aspire initiatives, is looking forward to save around Rs 150 crore in the current year financial over its last year’s key performance indicators. Also, the company’s Aspire team, working with leading Economic Value Add (EVA) consultants Stern Stewart, is optimistic that it would be able to take this figure up to Rs 450 crore by 2005 in order to make the steel major Economic Value Add positive even in an average year when profit after tax (PAT) for the company hovered around Rs 400 crore.

According to its present investment status, Tata Steel needs to earn a profit after tax (PAT) of around Rs 850 crore to make it an economic value addition (EVA) positive company. Economic value addition (EVA) is positive for a company when the return on net assets (RONA) is greater than the cost of the capital invested. Tata Steel managing director, Mr B Muthuraman, while unfolding ’Vision 2007’ on May 2, this year, had said that the company would like to become economic value addition positive in its core business "in three years’ time". According to chief, Aspire & Improvement Group, Mr Bimlendra Jha, while initiatives such as total operational performance (TOP) has been in place for the last three years, TOP in marketing has been introduced only recently while some others like ’clean chit capital redesigning’, which re-looks at the company’s capital expenditure projects, awaits introduction.

Strategic sourcing initiative, which aims at optimising all the company’s purchases, is a third area being looked at by the Aspire team to yield savings. Other Aspire initiatives include continuous improvement projects such as value engineering, Juran technique, six sigma, total production maintenance, quality circle, etc.

"At least Rs 400-Rs 450 crore has to be annually found by way of improvements. The reason is that our average profitability (PAT) is around Rs 400 crore and for the company to be EVA positive a PAT of around Rs 800-Rs 850 crore is required," said Mr Jha. The company’s Aspire programme focuses on revitalising its core business for a sustainable future. Tata Steel is already among the lowest cost producers of steel in the world.

"There are top-down targets we have for TOP. We normally take 40 per cent of a compressible cost as an aspirational target", said Mr Jha, adding, "how much we are able to achieve depends upon the quality of facilitation, the implementability of the ideas, etc".

A corpus of around Rs 20 crore is at the disposal for the various company-wide TOP programmes being run by Tata Steel. "Initially ideas which promised only 100 per cent return on investment (ROI) were taken up and given support; the low-hanging fruits having been plucked, now ideas which promise 50 per cent ROI are being supported," said the Aspire chief, speaking exclusively to FE recently.

Asked how exactly was the company able to gauge the contributions by the various Aspire programmes, Mr Jha said, "There is an involved methodology to filter out the impact due to prices; over & above the prices, the key performance indicators should move this year by Rs 150 crore over last year." "We have systems in place to track the success at any point of time with respect to last year, first half, our annual business plan, etc", he added. Tata Steel has introduced TOP in marketing only a couple of months back. Also known as micro-marketing, the drive focuses on customer value management (CVM) of its key customers, retail value management (RVM) of its retailers and distributors, and customer product optimisation.

While TOP in general is primarily based on cost in all areas, TOP in marketing focuses on customer and retail value enhancements. Explained the Aspire chief: "Whereas for products like Tiscon getting brand value would be the objective, for products like galvanised sheets, our objective would be to get both market share and brand value".

The company expects to derive a saving of around Rs 15-20 crore in the current year from TOP in marketing.

Talking of ’clean chit capital redesigning (CCCD)’ Mr Jha said the total revamp of the F-blast furnace earlier this year, which resulted in a hike in capacity from 0.6 mtpa to 1 mtpa in a record time was a good example of the savings the company could force by introducing CCCD in the area of capital projects.

The steel major, in order to reach to an EVA positive situation earlier than planned as also to see that its Aspire initiatives get a good support from the organisation, is using key levers such as enhancement of its product mix, branding in a big way, looking continuously at cutting costs, building relationships with customers and suppliers, etc.

According to the Aspire chief, Tata Steel sold around 27,000 tonne of its 62,000-tonne CRM production in August this year directly to the customers in the auto, auto ancillary and white goods sectors. "We want to take this figure to 40,000 tonne, which we expect to reach if not by March surely by August next year," he cited by way of an example of the company’s continuous efforts at selling more value-added products.

"We want to communicate the value which are represented by brands like Tiscon, Tata Shaktee, etc, and then derive the mileage of that value," Mr Jha said.