Continuous Improvement
Understanding Customer Needs
Integrated steel plants are capital intensive with a long payback period. It is natural therefore, for steel plants to maximise capital productivity through volumes. Like any other steel plant in the past, Tata Steel’s focus had been internal, primarily on cost and volumes. With its growing understanding of TQM and Theory of Constraints (TOC) on the journey towards the Deming Application Prize, its customer focus and approach to the market has undergone a significant change. It started changing the levers of improvement from an internally focussed efficiency driven culture to a culture of value creation with customers and suppliers.
Some specific approaches in the market that Tata Steel started were Customer Value Management (CVM), Retail Value Management (RVM) and Solution for Sales (SFS). These approaches focussed on the “needs” rather than “wants” of the customer. It is important to note that these approaches were continued or initiated in a supplier’s market condition when the steel cycle was on a high. Even as the overall market experienced seasonality of demand, the retail sales (through which a significant volume of construction bars is sold) of Tata Steel India was rather insulated.
In a downturn, it is often tempting to chase sales. This inevitably results in a price war which is detrimental to the organisation and the industry. The objective therefore should be to create value for the customer or in other words, should help the customer make money. The assumption that the customer makes money when prices are low can often be unfounded. The journey towards the Deming Application Prize using TQM, provided a deep insight of the needs of the customer and how to capitalise on the need without jeopardising mutual interests.
Mirroring the CVM process, Tata Steel initiated the Supplier Value Management (SVM) programme with its key suppliers, which also works on the ‘one firm concept’ with the objective of mutual value creation. Similarly, focussed approaches to improve and effectively manage raw materials have been undertaken with the objective to maximise the use of captive resources.
