Agility in heavy industry: Tata Steel Europe shares its S&OP story
All companies plan, but not all companies plan well. In an unforgiving global economy, manufacturers can’t afford to overlook any way to maximize profits. They have to squeeze every bit of inefficiency out of their operations, boost customer satisfaction to encourage repeat buying and find new markets for high-margin specialty products (often at short notice).
The key to one company’s success? Anaplan’s connected planning platform which orchestrates demand forecasting, just-in-time deal-making, manufacturing, logistics, and financial planning into a data-driven, efficient, and agile process.
The mandate: Create value at every step
Tata Steel (a subsidiary of India-based Tata Group) is one of Europe’s leading steel producers, with two of its major steel mills in Port Talbot, UK, and the third in IJmuiden, the Netherlands. It also has offices throughout Europe and North America. Tata makes specialized steel products – sheets, coils, and tubes that can be configured in dozens of thicknesses, tensile strengths, and finishes, for everything from food cans to auto parts to laser-cut, precisely configured industrial components. It produces about 10 million metric tons of steel a year, bringing about €7.1 billion in annual revenue.
Capital and operating expenses, including raw materials, labor, state-of-the-art mills, and shipping, are high in the steel industry – so profit margins are slim. “The business mandate is always in front of us, so we know everything we do must create value,” says Dr. Svend Lassen, head of reporting and data analytics for sales, marketing, and supply chain at Tata Steel.
Lassen knew digital transformation could make a solid contribution to the profitability mandate. So he set up a new function, reporting and analytics, in the mid-2010s. This team supports business decision-making with analytics, dashboards tracking key performance indicators, and business planning solutions. More generally, his team also helped the company create consistent data governance policies and make the insights from this new generation of digital tools more broadly accessible.
The challenge: Get better insight into the supply chain
The biggest challenge facing Lassen’s new reporting and analytics team was that customer surveys were revealing dissatisfaction – not with product quality or price, but how quickly and reliably they were getting their orders filled.
“We had long lead times for configuration, and it was hard to predict when orders would come out of production,” he says. “And because we didn’t have much transparency into where the steel was, we also weren’t fully utilizing any free production capacity for new orders.”
The company needed to boost supply chain efficiency (and therefore profitability) by getting better insight into real-time steel production. Tata Steel’s production lines often had downtime between fulfilling existing requests that could be used on new projects.
The problem was not just to figure out when production resources were available but also to share that information with the sales reps, who could reach out to prospective customers with “flash sale” offers. But this business model could only work if the reps had reliable, real-time updates and the company’s planners could quickly calculate if a potential deal would be profitable.
And the information needed to flow in all directions, connecting finance, procurement, manufacturing, logistics, and sales. “From our perspective, when we talk about sales and operations planning, or S&OP, we don’t see it only as supply chain, but indeed as business planning,” Lassen says.
The plan: Balance demand and supply
Lassen and his analytics team launched a long-term digital transformation program called Future Value Chain, coordinating all the efforts to improve profitability from demand and supply perspectives. They adopted the Anaplan Connected Planning platform because it enables planning and forecasting across multiple departments and business processes.
They built planning solutions for three main steps in the value chain:
- Demand forecasting. Tata Steel can now work collaboratively with customers to anticipate demand for specific products in each country where it does business, up to three years ahead. The Anaplan platform applies machine learning to historical data to create demand forecasts that are much more accurate than Tata’s previous stand-alone forecasting tool.
- Sales and operations planning (S&OP). In this step, Tata balances projected steel demand against what it can supply from its various mills. And now that the Anaplan platform makes it easier to identify both overall demand and production capacity at any given time, the company can prioritize the most profitable and/or strategic orders (say, from faithful customers who can be counted on for repeat business).
- The newest addition, a Risk and Operations tool, lets the company spot gaps on its production schedule where it can slot in new orders at short notice. It gives sales reps the ability to negotiate commitments with prospective customers in real time, thanks to a handy mobile version.
The result: Less downtime, more sales with connected planning
So far, the Future Value Chain initiative has helped Tata Steel:
- Shrink order backlogs substantially, which improves customer satisfaction.
- Reduce the amount of raw steel stock waiting to be configured into sellable products by 20 percent (a drop of about 400 million kilos) and reduce waste, freeing up cash flow for other purposes.
- Improve competitive differentiation by opening up more slots to make specially configured orders.
- Increase income by more than €10 million a year, or 5-10 percent of the company’s yearly gross revenue.
On top of those balance-sheet benefits, in 2019, the World Economic Forum named Tata Steel’s Netherlands plant one of its “Manufacturing Lighthouses,” a global network of factories that are models for using cutting-edge industrial technologies. “We were very proud to be on that list of ‘factories of the future,’ as a steel producer,” Lassen says.
What’s more, the Anaplan S&OP platform has helped Tata Steel ride out the economic shocks of 2020. When COVID hit, the company didn’t have to adopt new forecasting techniques – just build scenarios for various types of downturns (long or short, deep or shallow), then monitor actual demand closely in Anaplan’s dashboards, to see which scenario seemed like the best match and adjust the long-range plan accordingly.
“All that uncertainty also meant making more frequent planning updates than we used to,” even week to week, Lassen comments. “That was one more way it helped to have such good linkage between demand forecasts and other areas of production, such as maintenance and finance. And we were able to build in external market indicators such as car sales and aggregate demand for steel, to get even more forward perspective.”
Lessons learned: Democratizing data pays off
For Tata Steel, transformation meant not just adopting new applications, but learning to work differently – with more cross-departmental alignment, and making data-driven insights more broadly accessible. “That was quite a significant journey,” Lassen reflects.
For example, the stakeholders had to balance the competing interests of maintaining centralized control over planning data, for the sake of security, versus sharing it more widely, Lassen recalls. “Tata Steel stakeholders ultimately saw the benefits of data democratization, using analytic tools and dashboards to derive actionable insights that create business value. It’s been really transformative. And Anaplan has been with us the whole way.”
To learn more about how Tata Steel Europe is using the Anaplan platform to align strategy with execution and increase revenue, plus behind-the-scenes views of implementation (such as the organizational challenges of moving a large company to an agile development model), watch the on-demand webinar The growth driver — S&OP as the ultimate engine aligning business plans.