1. Tell us about TSPDL and the part it plays in the life cycle of the steel that is delivered to customers?
TSPDL’s role is to cut and process the 30-tonne steel coils made by Tata Steel to the shape and size that customers need. We are the largest steel-processing company in India, maybe even in Asia. For Tata Steel alone we process 1.3 million tonnes of the metal per annum. We have eight processing centres and a national network of distribution centres across India.
Earlier, steel producers in India supplied steel only as coils, a form that is not used today by most customers. Take the auto industry. In the old days, Tata Motors, Hindustan Motors, Ashok Leyland, etc had to put up their own processing facilities to convert the coils into sized blanks that could be used for manufacturing components: chassis frames, long members, pressed parts, etc. This was extremely inefficient because it was not their core activity and equipment utilisation was low.
The concept of a steel service centre did not exist in India prior to 1997. This was when Tata Steel felt that the market was ready for a change. Although it was able to meet standards, the opening up of the Indian economy meant that the company had to compete with international players. For Tata Steel the challenge was to differentiate its products in the market; we had to offer processing and just-in-time (JIT) distribution to add value.
In 1997, Tata Ryerson was set up — as a 50:50 joint venture between Tata Steel and an American company, Ryerson Tull — to bring steel service centre solutions to industrial customers in India. The American partner sold its equity stake to Tata Steel in 2009 and the company was renamed TSPDL in January 2010. That’s how we have evolved to become the last-mile connect for Tata Steel.
2. What exactly is the value addition that TSPDL provides?
For a steel mill, any order less than a thousand tonnes is not interesting; for a service centre, even a 100kg order is eminently serviceable. We have more than 1,000 customers, we hold stocks for them, cut and process the steel, and supply whenever they want. The value addition that we provide is enormous. Customers like Toyota Motors can be assured of quality when they use our products because of our process and our quality systems.
Another aspect is inventory management. Maruti works on a one-day inventory because we maintain a JIT system for them. We are able to offer these services because we can garner economies of scale by aggregating the requirements of several customers. We cater to the entire auto industry and not just Tata Motors, so capacity utilisation is much higher. In fact, we can claim that there is a little bit of our steel in every two- three- and four-wheeler in India today.
3. Could you spell out the vision of the company?
When we started in 1997 our vision was to supply everything — steel, aluminium, stainless steel and plastics — but we soon realised that we had to limit ourselves to steel. Our turnover then was Rs18 million, but we set a target of Rs5 billion. We got there quickly and then we decided that, rather than chase a rupee target, we ought to aim to be the leader in India.
In 2012 we revisited the vision, through a company-wide exercise that included all employees and even inputs from key customers such as Tata Motors, Maruti and Ashok Leyland. Our vision now is to be a global benchmark in the industry for excellence in service.
4. What about your growth plans?
Our growth is, in many ways, aligned to that of Tata Steel. For instance, Tata Steel has recently put up a thin-slab caster with a capacity of 2.4 million tonnes a year. The new Kalinganagar plant will produce 3 million tonnes of steel in 2015, at least half of which will need processing. So we need to have capacities in place.
We are continually opening up new centres and supplying new products. Currently it is zinc-coated or colour-coated steel blanks and strips, which we have geared up to supply. We try to take care of the entire spectrum of customers’ needs, even when it comes to non-Tata Steel products. Take the construction machinery sector — Caterpillar, Komatsu, John Deere, etc — which requires heavy steel plates, a product that Tata Steel does not make. We source the raw material from Steel Authority of India, Essar, imports, etc. We do not just cut and shape; we bend and we weld. At times, I feel we are just one stage away from making the entire thing.
5. How do you stay ahead of the competition?
Our big strength is our distribution network; it is well established across India, which makes our service capabilities superior to that of others. We try to ensure that we have the best technology. We get the latest equipment from Spain, Japan and Germany. Our newest centre at Chennai will be the first in India to handle high-tensile products. We are the only service centre in Asia that has patented two processes, one for length measurement and the other for automatic segregation of sheets. We have also developed extremely accurate laser-based equipment.
Our contribution to the Tata Nano project illustrates the point. Ratan Tata (former Chairman, Tata Sons and Tata Motors) threw us a huge challenge: develop the undercarriage of the Nano at half the weight and at a lower cost, but with no compromise in strength. We went to Detroit and Pittsburgh in the United States and to Canada to look at various technologies. We even spoke to people at NASA (the American space agency) to look at metals used in rockets and forming technologies. We then used a new technology called roll forming and stretch bending, and developed special purpose machines for this project. Mr Tata has now asked us to look at developing this process for the Tata Indica, too.
We want to focus not just on customer satisfaction and engagement, but on customer experience. Our customers should feel that they are in a place where people are prepared to go the extra mile for them. We try to exceed the expectations of our customers and understand their future needs. When you have international players like Posco in town, customer experience is going to be the key differentiator. We are working with Accenture, McKinsey and other consultants on this front. We will require a lot of people training and cultural training.
6. How does your innovative vendor service model work?
Our vendor service model is innovative for sure and this has been discussed as a case study at Harvard. Allow me to explain. There are a few key players in the steel value chain as it applies to any industry. In automotive, for example, these would be Tata Steel, TSPDL, the vendor who supplies parts or components, and the automaker.
Earlier, the steel mill could reasonably handle transactions with the automaker, but it was near impossible to provide good service to individual vendors, whose requirements were small and fragmented. This is where TSPDL stepped in, to provide the last-mile connect between Tata Steel and the vendor. Again, if steel prices changed, vendors would wait for the automaker to revise the prices of the final component, delaying production and deliveries.
Now all of us sit at a table and negotiate so that the final vendor price is linked to the base steel price. In essence, the automaker is fixing the price with Tata Steel and the component price can go up or down based on steel prices. TSPDL’s role is to work out numbers — how many cars will be made and what is the amount of material needed — and guarantee the supplies and the service levels.
Other service centres are trying to craft a similar arrangement but so far no one has been successful. We have the first-mover advantage.
7. On a different tack, how is the company going about grooming future leaders?
Our employee strategy is critically important and motivating people is one of my tasks. At TSPDL we don’t have clerks; we have only officers. Our non-managerial staff are called associates. We have created a process of identifying star managers: employees with consistently superior performance over a two-year period are shortlisted and then interviewed by a team that includes two outsiders, (a psychologist and a professor), and our top managers. These star managers are then groomed as potential leaders. We have a team of 23 such ‘star managers’. Their training is my personal responsibility. We have a training module for them, planned in collaboration with the Indian Institute of Management, Calcutta. Many Tata companies have taken note of this process.
8. Tell us about some of your skill-building initiatives.
When it comes to building skills in the community, we give preference to scheduled caste and scheduled tribe candidates. We have adopted industrial training institutes (ITIs), where we design the programme and some of our people are also on the faculty. We are supporting skill-training centres with funding from the National Bank for Agriculture and Rural Development, and we are working with the ITIs to develop these centres. The uniqueness of the programme is that we give recruits a job first, followed by training. We pay each candidate Rs5,000 a month, of which Rs1,000 is recovered as repayment for the loan towards the training, which is not free. We insist that the candidates pass on Rs500 to their parents. After the training, they are absorbed in TSPDL or in other companies, Tata and non-Tata.
9. You are known as a ‘steel man’...
I have been in steel all my life. Tata Steel has given me several opportunities, especially to work for the community. Currently I am the chairman of the Confederation of Indian Industry’s development council. My role is to help work out ways to improve the quality of life of the poor in India. I believe the solution does not lie in handing out money; you have to be able and willing to go door to door, to work with your hands if need be. After retirement I would like to be involved to a greater extent with social development causes.
Education is my other interest. I am on the board of governors of the Indian Institute of Technology, Kharagpur, and I am also associated with a few management schools. I do not want to teach professionally, but interacting with students and children gives me immense satisfaction.