Main Subject: Steel Cost Optimization

1.1.
Main subject : Steel Cost Optimization
The project is entitled as “steel cost optimization by Raw material yield improvement”. The
main objective of the study is to optimizing the steel cost by improving the yield. The yield can
be improved by maximizing the utilization or minimizing the wastage. In Eicher Motors the
raw material is broadly classified in to steel, proprietary, Forging, casting and others. The total
raw material buying cost per year is around Rs.1911.46 crores. In this the steel accounts to
Rs.454.71crores, proprietary is Rs.884.84 crores, forging is Rs.199.67 crores, casting accounts to
Rs.229.42 crores and others is Rs.142.80 crores. As the cost of procuring the steel per year is
more and in this, lot of material is being wasted. If this wastage can be minimized, material as
well as money can be saved. This steel is procured in the form of Sheet metal, steel, pipes etc. In
the sheet metal the wastage is noticed more and this can be minimized. Generally the steel is
purchased in the form of coils and standard sheets of dimensions
(thickness*1250mm*2500mm).These steel coils and standard sheets are cut into blanks from
which the parts are manufactured. During the process of cutting material is wasted as scrap. The
study is to minimize that, by optimize the utilization and minimizing the cost of raw material.
Figure 1.1: Buying Pattern of Raw Material
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Raw material Amount in MINR
Steel 4547.11
Proprietary 8848.49
Forgings 1996.76
Casting & Machining 2294.29
Others 1428.02
(MINR million rupees) 19114.68
Table 1.1: Total Raw material Procured for the year 2010
In the cost optimization, optimization refers to finding an alternative with the most cost
effective or highest achievable performance under the given constraints, by maximizing desired
factors and minimizing undesired ones. In comparison, maximization means trying to attain the
highest or maximum result or outcome without regard to cost or expense. Practice of
optimization is restricted by the lack of full information, and the lack of time to evaluate what
information is available (see bounded reality for details). In computer simulation (modeling) of
business problems, optimization is achieved usually by using linear programming techniques of
operations research. The cost optimizing in the study is achieved by changing the dimension of
standard sheet.
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1.2.Review of literature
A review of literature on steel cost optimization revealed not many available studies in the
area. Several studies reported product development platforms for intelligent concurrent design
and manufacturing of sheet metal parts (Xie, Tu, Aitchison, Dunlop & Zhou, 2001). These
modules mainly include the structure of product development platform, an information
integration framework, a real time computer aided process planning module, a customer interface
module and a design/manufacturing knowledge-based module for supporting product design and
manufacturing. An information integration framework, called step structure information
framework is proposed. The principles, called zero thickness and zero bend radius are put
forward, which can be used to abstract the geometric entities of sheet metal parts in order to
facilitate product design and modeling. An automated optimization method based on multipoint
approximations and applied to the design of a sheet metal forming process was presented by S.
Kok and N. Stander
Jansson, Andersson & Nilsson (2005). Characterization of the final product thickness
distribution as a function of the performing die shape variables was achieved by constructing
linear approximations to the noisy responses using response surface methodology. An automated
panning-zooming scheme is reportedly used to resize and position the successive regions of
approximation. The methodology was applied to optimally design the performing die shape used
in the manufacture of an automotive wheel centre pressing from a sheet metal blank. A weight
saving of up to 9.4% was reportedly realized.
Space mapping as a very effective and accurate method to use when calibrating the draw-
in of a sheet metal process was utilized by Jansson, Andersso & Nilsson (2005). A new
numerical approach to optimize the shape of the initial blank which plays an important role on
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the quality of the final workpiece was obtained by deep drawing of thin sheets based on the
coupling between the inverse approach used for the forming simulation and an evolutionary
algorithm, as shown by Naceur, Guo and Batoz (2004). The efficiency of metamodel, the
particle swarm optimization intelligent sampling (PSOIS) scheme is developed by Hu, Yao and
Hua, (2007). This kind of intelligent method can guarantee the sampling search in right direction
and constraint the bounds of design variables in feasible region. For validation of developed
method, the Rosenbrock function is successfully approximated by proposed method Hu, Yao and
Hua, (2007).
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1.3 Topic Related Concepts:
Supply chain management
Supply chain management (SCM) is the management of a network of interconnected
businesses involved in the ultimate provision of product and service packages required by end
customers. Supply chain management spans all movement and storage of raw materials, work-in-
process inventory, and finished goods from point of origin to point of consumption.
Strategic sourcing
Strategic sourcing is an institutional procurement process that continuously improves and re-
evaluates the purchasing activities of a company. In a production environment, it is often
considered one component of supply chain management. Strategic sourcing techniques are also
applied to nontraditional area such as services or capital.
The steps in a strategic sourcing process are:
1. Assessment of a company’s current spends (what is bought where?)
2. Assessment of the supply market (who offers what?)
3. Total cost analyses (how much does it cost to provide those goods or services?)
4. Identification of suitable suppliers
5. Development of a sourcing strategy (where to buy what considering demand and supply
situation, while minimizing risk and costs)
6. Negotiation with suppliers (products, service levels, prices, geographical coverage, etc.)
7. Implementation of new supply structure
8. Track results and restart assessment (continuous cycle)
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The term "Strategic sourcing" was popularized through work with a variety of Blue Chip
companies by a number of consulting firms such as A.T. Kearney, Booz Allen Hamilton,
KPMG, PricewaterhouseCoopers, and PRTM in the late 80s and early 90s. This methodology
has become the norm for procurement departments in larger, sophisticated companies.
Outsourcing is a method that can be employed as part of the overall sourcing strategy for
services. This involves the transfer of staff and assets to an external or third-party company
which then provides them back as a service
Sheet metal
Sheet metal is simply metal formed into thin and flat pieces. It is one of the fundamental
forms used in metalworking, and can be cut and bent into a variety of different shapes. Countless
everyday objects are constructed of the material. Thicknesses can vary significantly, although
extremely thin thicknesses are considered foil or leaf, and pieces thicker than 6 mm (0.25 in) are
considered plate.
Sheet metal is available as flat pieces or as a coiled strip. The coils are formed by running
a continuous sheet of metal through a roll slitter.
The thickness of the sheet metal is called its gauge. The gauge of sheet metal ranges from
30 gauge to about 8 gauge. The higher the gauge, the thinner the metal.
There are many different metals that can be made into sheet metal, such as aluminum,
brass, copper, steel, tin, nickel and titanium. For decorative uses, important sheet metals include
silver, gold, and platinum (platinum sheet metal is also utilized as a catalyst.)
Sheet metal has applications in car bodies, airplane wings, medical tables, roofs for
buildings and many other things. Sheet metal of iron and other materials with high magnetic
permeability, also known as laminated steel cores, has applications in transformers and electric
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machines. Historically, an important use of sheet metal was in plate armor worn by cavalry, and
sheet metal continues to have many decorative uses, including in horse tack
Gauge
The sheet metal gauge (sometimes spelled gage) indicates the standard thickness of sheet
metal for a specific material. For most materials, as the gauge number increases, the material
thickness decreases.
Sheet metal thickness gauges for steel are based on the weight of steel, allowing more
efficient calculation of the cost of material used. The weight of steel is 41.82 pounds per square
foot per inch of thickness (8039 kg/m3); this is known as the Manufacturers' Standard Gage for
Sheet Steel. For other materials, such as aluminum and brass, the thicknesses will be different.
Coil & Sheet
The steel mills will supply the steels in the form of the coils. These coils are of different
thickness and they are cut to sheets as per the requirement of the company. Generally in India the
coils are cut to the standard sheet of dimensions, Thickness*1250*2500(t*w*l) by the steel
service centers. But based on the requirement the coils can be cut to the length (for
manufacturing the long member.
Blanking
Blanking is a metal stamping operation by which the sheet metal is punched to get the
required outer profile of the sheet metal component. During the blanking process the blanking
punch penetrates into the sheet metal and forces the material into the blanking die. The portion of
the sheet metal which comes out through the blanking die opening is the component with the
required profile. Hence it is important that the dimension of the blanking die profile is equal to
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the dimension of the component profile. In blanking tools the cutting clearance is given on the
blanking punch
Nesting
Nesting refers to the process of efficiently manufacturing parts from flat raw material.
Companies manufacturing parts from flat raw material such as sheet metal use a variety of
technologies to perform this task. The sheet metal nesting for flat sheets and nesting for coils are
different algorithms. Material may be cut using off-line blanking dies, lasers, plasma, punches,
shear blades, ultrasonic knives and even water jet cutters.
In order to minimize the amount of scrap raw material produced by this process,
companies use nesting software. The software analyses the parts (shapes) to be produced at a
particular time.
Using proprietary algorithms, it then determines how to lay these parts out in such a way
as to produce the required quantities of parts, while minimizing the amount of raw material
wasted.
A number of off the shelf nesting software address the optimization needs. While some
cater to only rectangular nesting others also offer profile or shape nesting where the parts
required can be any odd shape and not just rectangles. These irregular parts can be created using
popular CAD tools. Most of the profile nesting software can read IGES or DXF profile files
automatically, a few of them work with built in converters.
An important consideration in shape nesting is to verify that the software in question
actually performs true profile nesting and not just block nesting. In block nesting an imaginary
rectangle is drawn around the shape and then the rectangles are laid side-by side which actually
is not profile nesting. There still remains a scope for waste reduction
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Nesting software must take into account the limitations and features of the machining
technology in use, such as:
• Machining cannot take place where the raw material is clamped into place;
• Some machines can access only half of the material at a particular time; the machine
automatically flips the sheet over to allow the remaining half to be accessed;
• When punching, the width of the punch tool must be considered;
• Shearing may be permitted only in certain areas of the sheet due to limitations of the
machinery;
• A laser can cut parts at any rotation; a punch can only do so at right angles;
Nesting software may also have to take into account material characteristics, such as:
• Defects on material that must be discarded;
• Different quality areas that must match corresponding quality levels required for different
parts;
• Direction constraints, that may come from a printed pattern or from fiber direction;
Many machine manufacturers offer their own custom nesting software designed to offer ease
of use and take full advantage of the features of their specific machines.
If a fabricator operates machines from more than one vendor, they may prefer to use an off-
the-shelf nesting package from a third-party vendor. They then have the potential to run jobs on
any available machine, and their staff should not have to learn several different software
packages.
Hot rolled& cold rolled steel
Hot rolling
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Hot rolling is a metalworking process that occurs above the recrystallization temperature
of the material. After the grains deform during processing, they recrystallize, which maintains an
equiaxed microstructure and prevents the metal from work hardening. The starting material is
usually large pieces of metal, like semi-finished casting products, such as slabs, blooms, and
billets. If these products came from a continuous casting operation the products are usually fed
directly into the rolling mills at the proper temperature. In smaller operations the material starts
at room temperature and must be heated. This is done in a gas- or oil-fired soaking pit for larger
work pieces and for smaller work pieces induction heating is used. As the material is worked the
temperature must be monitored to make sure it remains above the recrystallization temperature.
To maintain a safety factor a finishing temperature is defined above the recrystallization
temperature; this is usually 50 to 100 °C (122 to 212 °F) above the recrystallization temperature.
If the temperature does drop below this temperature the material must be re-heated before more
hot rolling.
Hot rolled metals generally have little directionality in their mechanical properties and
deformation induced residual stresses. However, in certain instances non-metallic inclusions will
impart some directionality and work pieces less than 20 mm (0.79 in) thick often have some
directional properties. Also, non-uniformed cooling will induce a lot of residual stresses, which
usually occurs in shapes that have a non-uniform cross-section, such as I-beams and H-beams.
While the finished product is of good quality, the surface is covered in mill scale, which is an
oxide that forms at high-temperatures. It is usually removed via pickling or the smooth clean
surface process, which reveals a smooth surface. Dimensional tolerances are usually 2 to 5% of
the overall dimension. Hot rolling is used mainly to produce sheet metal or simple cross sections,
such as rail tracks.
Cold rolling
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Cold rolling occurs with the metal below its recrystallization temperature (usually at
room temperature), which increases the strength via strain hardening up to 20%. It also improves
the surface finish and holds tighter tolerances. Commonly cold-rolled products include sheets,
strips, bars, and rods; these products are usually smaller than the same products that are hot
rolled. Because of the smaller size of the work pieces and their greater strength, as compared to
hot rolled stock, four-high or cluster mills are used. Cold rolling cannot reduce the thickness of a
work piece as much as hot rolling in a single pass.
Cold-rolled sheets and strips come in various conditions full-hard, half-hard, quarter-
hard, and skin-rolled. Full-hard rolling reduces the thickness by 50%, while the others involve
less of a reduction. Quarter-hard is defined by its ability to be bent back onto itself along the
grain boundary without breaking. Half-hard can be bent 90°, while full-hard can only be bent
45°, with the bend radius approximately equal to the material thickness. Skin-rolling, also known
as a skin-pass, involves the least amount of reduction: 0.5-1%. It is used to produce a smooth
surface, a uniform thickness, and reduce the yield-point phenomenon . It is also used to break up
the spangles in galvanized steel. Skin-rolled stock is usually used in subsequent cold-working
processes where good.
Existing method of blanking
The standard sheets are cut into blanks as per the dimensions. These blanks are machined
to get the required components. Existing method of blanking, for example if the size of the sheet
is 12*1250*2500 and the blank size is 12*150*200.The number of blanks can be calculated by
the formula ((length of sheet/length of blank)*(width of sheet/width of blank)).In this case the
number of the blanks are 96.From this example raw material wastage can also be calculated. The
formula for weight of the sheet is (volume*specific weight), ((6*1250*2500)*7.86/10^6) i.e. the
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weight of the sheet is 294.75 kg’s. Similarly the weight of the single blank is calculated i.e. 3.07
kg’s, as there are 96 blanks the total weight is 288.The material wasted or scrap generated is
(actual weight of the sheet)-(Total weight of the blank) 6 kg’s . This is explained with diagram
the yellow colored are the blanks and the red color is the material that is being wasted scrap.
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Existing method of blanking
1250
mm
150
1 2 3 4 200mm 7 8
mm
9 10 11 12 13 14 15 16
17 18 19 20 21 22 23 24
25 26 27 28 29 30 31 32
2500 mm 33 34 35 36 37 38 39 40
41 42 43 44 45 46 47 48 50
mm
49 50 51 52 53 54 55 56
57 58 59 60 61 62 63 64
65 66 67 68 69 70 71 72
73 74 75 76 77 78 79 80
81 82 83 84 85 86 87 88
89 90 91 92 93 94 95 96
100 mm
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No of
blank
Part No Description
Sheet sheet Blank s per blank
S. no size(mm) weight size(mm) sheet weight

IC30194 BRACKET SPRING BRAKE ACTUATOR 12*1250*250 12*150*20
1 4 RH 0 294.75 0 96 3.07kg
IA20425 12*1250*250 12*297*27 8.1kg
2 6 BKT. SPRING BRAKE ACT. RH 0 294.75 1 36

IA20425 12*1250*250 12*297*27 8.18kg
3 5 BKT. SPRING BRAKE ACT. LH 0 294.75 1 36

IA22353 12*1250*250 12*255*39 12.2kg
4 8 BKT. SPRING BRAKE ACT. LH (MCV) 0 294.75 5 27

IA23179 12*1250*250 12*260*12 3.68kg
5 7 SPACER (15.16) 0 294.75 0 90

IA20316 12*1250*250 12*350*25 9.8kg

IA20316 12*1250*250 12*350*25 9.82kg

IA20316 12*1250*250 12*350*25 9.82kg

IA20316 12*1250*250 12*350*25 9.82kg

Table 1.2: Number of blanks per sheet
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2.1 Need of the study
The main aim of this project is to minimize the raw material wastage by optimizing the
yield of utilization. The raw materials are the basic source for manufacturing any component. As
resources are limited in current scenario, this study carries more importance. Eicher motor’s is an
automobile assembling unit where parts are procured from various vendors and assembled. The
parts are categorized as proprietary, steel (sheet metal), forgings, castings, rubber and plastics
etc. Here the utilization of the steel is very high and at the same time during manufacturing
process wastage is also high. The study is confined to the sheet metal for 14 suppliers where the
utilization is more i.e. more number of parts are being manufactured. There are nearly 40
suppliers for the sheet metal.
It was found that during manufacturing process a lot of material was being wasting. If
this wastage is minimized and controlled it can lead to reduction in the cost of raw materials .By
this crores of rupees can be saved for the company. More over the most important issue is saving
the raw material .As the resources are being depleted they must be utilized to the best. In the
recent days many companies have recognized importance of this and launched many programs,
for example Maruthi motors has conducted a workshop with a motive to save at least one gram
of material from each part. As Eicher motors recognized importance of this and introduced few
programs for optimizing the material utilization, these are monitored by strategic sourcing which
is a sub function of Materials & Supply Chain Department.
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2.2 Objective & Scope of study
The main objective of the study is to assess raw material utilization to understand wastage if
any and suggest measures to reduce wastage through
• Study of blank size on part number
• Consolidating blank sizes of parts according to the thickness and calculating the cost per
year for each thickness.
• Calculate the potential savings from the feasible proposals. Calculating the yield from it.
2.3 Scope of the study
The study was conducted at “Volvo Eicher Commercial Vehicles” for the duration of three
months (Jan 18th-April 9th) in the functional area of Strategic Sourcing which is a sub-function of
Supply Chain and Logistics Department. For collecting the data which is required for my study, I
have been to 14 suppliers of sheet metal in Pune and Indore. To know the feasible proposals, I
have been to steel processing centers “Tata Ryerson and Him-Nill” at Pune. With the valuable
guidance from Mr. Raj Bhide General Manager of Him-Nill which helped in finalizing the
proposals and these proposals have got huge importance at the company to bring a better cost
optimization. I have also visited Mahindra Forging in Pune and Yash Metalics in Kolhapur and
there I learned the Forging and casting technologies. This knowledge helped me in clear
understanding of the manufacturing technologies at the company.
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2.4. Problem statement
The standard sheet of dimensions (Thickness*1250mm*2500mm) is sheared into blanks
for manufacturing the parts. During the process blanking, it was found that lot of material is
being wasted. Generally for the standard sheet nesting will be done & accordingly the suppliers
will cut in to blanks. Nesting is the process of designing the orientation of the blank in the sheet
in order to get the maximum output. For simple designs nesting can be done efficiently without
any wastage, for complex designs the nesting is bit difficult and sheet material is being wasted.
This problem can be resolved by experimenting with changing the sheet dimensions i.e. the
width or length of the sheet. The problem can be explained with help of Case Study. For
manufacturing a component the sheet has to cut in to blank size as shown in the fig. For that
blank size the nesting layout of the sheet is shown with the help of the software “COST
OPTIMISER”. The problem is that, by the existing method of sheet dimensions the utilization of
the material is 61% i.e. 39% of the material is being wasted. It is shown below how the blank
development & yield improvement can be done by varying the sheet layout and using this
software in three cases for different components.
Blank Development & Yield Improvement
Case Study 01-
For this component the blank will cut from the sheet as shown, and the nesting will we
done as shown
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Component Blank Development
Figure 2.1: Component and Blank Development
If the nesting is done in the following way the material utilization and the yield is varied.
Figure 2.2:Nesting Layout One up—Utilization 61%, Gross Weight—0.778 kg
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2.5. Data collection methods
The data used for the study included dimensional data of the raw material. The data for
the study is collected from both internal sources as well as external sources. Initially the data
required for the study is taken from the past data that is stored by sourcing department in their
Management Information System. Later the data was tabulated and for comparison, data was
collected from the suppliers. For making the proposals, data on standard dimensions of sheet
metal was collected from the steel mills.
2.6 Data tabulation
The collected data is tabulated by using the Microsoft Excel. The data of the parts and
part number are collected and accordingly the blank sizes of the parts are collected. By using the
formulae (as shown in the annexure) the total number of blanks and weight of the blanks and
cost of the blank per year are calculated and tabulated. Similarly the same data is collected for
the proposal widths i.e.1100mm, 1400mm, 1500mm.
2.7 Analysis method
By using the Microsoft Excel the data tabulated was analyzed. By comparing with the
existing sheets blank cost and scrap cost, the net savings are calculated for different thickness
and these data is consolidated to find the total savings. For coil, cut to length method was
proposed and by using the data savings are calculated.
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2.8. Limitations of the study
• The study is confined to the hot rolled steel (i.e. thickness more than 3mm) not extended
to cold rolled.
A Hot rolling is a metalworking process that occurs above the recrystallization
temperature of the material. After the grains deform during processing, they recrystallize,
which maintains an equiaxed microstructure and prevents the metal from work hardening.
The starting material is usually large pieces of metal, like semi-finished casting products,
such as slabs, blooms, and billets. The sheet of the hot rolled are thicker when compared
with cold rolled. Due to this most of the parts are manufactured with the hot rolled.
Hence my study is limited to hot rolled.
• The study is limited to 14 suppliers. Total suppliers are 40 for sheet metal.
As the suppliers are located in the different parts of the country and for the
ambience I have limited my study to 14.
• The proposal of the cut to length is practically possible if the total quantity is more than 5
tons.
As the cost of cutting for the cut-to length dimension is more it is viable for more
volumes i.e. more than 5 tones for each component.
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3.1 Automotive industry in India
The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 11 million vehicles (including 2 wheeled and 4
wheeled) and exports about 1.5 million every year. It is the world's second largest manufacturer
of motorcycles, with annual sales exceeding 8.5 million in 2009. India's passenger car and
commercial vehicle manufacturing industry is the seventh largest in the world, with an annual
production of more than 2.6 million units in 2009. In 2009, India emerged as Asia's fourth largest
exporter of passenger cars, behind Japan, South Korea and Thailand.
As of 2009, India is home to 40 million passenger vehicles and more than 2.6 million cars
were sold in India in 2009 (an increase of 26%), making the country the second fastest growing
automobile market in the world. According to the Society of Indian Automobile Manufacturers,
annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9
million by 2020. By 2050, the country is expected to top the world in car volumes with
approximately 611 million vehicles on the nation's roads.
A chunk of India's car manufacturing industry is based in and around the city of Chennai,
also known as the "Detroit of India" with the Indian city accounting for 60 per cent of the
country's automotive exports. Gurgaon and Manesar near New Delhi are hubs where all of the
Maruti Suzuki cars in India are manufactured. The Chakan corridor near Pune, Maharashtra is
another vehicular production hub with General Motors, Volkswagen/ Skoda, Mahindra, Tata in
the process of setting up or already set up facilities. Ahmedabad with Tata Motors Nano plant
and Halol with General Motors in Gujarat, Aurangabad in Maharashtra, Kolkata in West Bengal
are some of the other automotive manufacturing regions around the country.
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On the canvas of the Indian economy, automotive industry occupies a prominent place.
Due to its deep forward and backward linkages with several key segments of the economy,
automotive industry has a strong multiplier effect and is capable of being the driver of economic
growth. A sound transportation system plays a pivotal role in the country's rapid economic and
industrial development. The well-developed Indian automotive industry ably fulfils this catalytic
role by producing a wide variety of vehicles: passenger cars, light, medium and heavy
commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three
wheelers, tractors etc.
Automotive Industry comprises of automobile and auto component sectors and is one of
the key drivers of the national economy as it provides large-scale employment, having a strong
multiplier effect. Being one of the largest industries in India, this industry has been witnessing
impressive growth during the last two decades. It has been able to restructure itself, absorb newer
technology, align itself to the global developments and realize its potential. This has significantly
increased automotive industry's contribution to overall industrial growth in the country.
The automotive industry (including components & tyres) has already attained a turnover
of US$ 48.86 billion. The industry provides direct and indirect employment to 13.1 million
people. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to
4.14% in 2008-09.The industry is also making a contribution of 17% to the kitty of indirect taxes
of the Government.
Growth Drivers of Indian Automobile Market
• Rising industrial and agricultural output
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• Rising per capita income
• Favourable demographic distribution with rising working population and middle class
Urbanisation
• Increasing disposable incomes in rural agri-sector
• Availability of a variety of vehicle models meeting diverse needs and preferences
• Greater affordability of vehicles
• Easy finance schemes
• Favourable government policies
• Robust production
India's Position in World's Production
• Well-developed, globally competitive auto ancillary industry
• Established automobile testing and R&D centers
• Among one of the lowest cost producers of steel in the world
• World’s second largest manufacturer of two wheelers
• Fifth largest manufacturer of commercial vehicles
• Manufactures largest number of tractors in the world
• Ninth largest car manufacturer in world
One of the major industrial sectors in India is the automobile sector. Subsequent to the
liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian
economy as this sector has witnessed tremendous growth.
Automobile Industry was delicensed in July 1991 with the announcement of the New
Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial
license is required for setting up of any unit for manufacture of automobiles except in some
special cases. The norms for Foreign Investment and import of technology have also been
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progressively liberalized over the years for manufacture of vehicles including passenger cars in
order to make this sector globally competitive.
At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in
this sector including passenger car segment. The import of technology/technological upgradation
on the royalty payment of 5% without any duration limit and lump sum payment of US$ 2
million is also allowed under automatic route in this sector. With the gradual liberalization of the
automobile sector since 1991, the number of manufacturing facilities in India has grown
progressively.
According to the data provided by Society of Indian Automobile Manufacturers (SIAM),the
cumulative sales data for April-February 2011 shows domestic sales growth of 26.92 percent
over same period last year. In February 2011 as compared to February 2010, domestic sales grew
at 21.32 percent.
Domestic Sales
At present time, Indian automobile industry is making a major contribution in increasing
the country's GDP by 9% every year. New heights have been scaled by the industry in the year
2010. In January 2010, total automobile sales in the domestic market reached 1114157 units, the
figures shows an increment of 44.9% compared to the sales units of 7,68,698 of same period last
year. Even for the month of April-October after a gap of 11 years, total automobile sales in India
stood at 1,120,081 Units. Annually, the Indian automobile industry is growing at an average rate
of 30% and marking itself as one of the fastest growing industries in India. According to the
reports of Society of Indian Automobile Manufacturers, annual car sales are estimated to reach 5
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million vehicles by 2015 and more than 9 million by 2020 To believe New York Times reports,
several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki
have expanded their manufacturing facilities owing to India's strong engineering base and
expertise in the manufacturing of low-cost, fuel-efficient cars.
The following statistics explains the market share of different vehicles in the Indian
automobile Industry.
Passenger Vehicles: 15.86%
Commercial Vehicles: 4.32%
Three Wheelers: 3.58%
Two Wheelers: 76.23%
Production Rate Statistics
The production of automobiles in India has greatly increased in the last decade. At
present India is the largest tractor and three-wheel vehicle producer, second largest two-wheel
vehicle producer, fourth largest commercial vehicle producer and eleventh largest passenger car
producer. For the year 2003-2004 the production rate crossed 7,243,5648 and for the current year
it has reached 14,049,830 in terms of total vehicles production. As a result of all this, the
resultant annual turnover of the Indian automobile industry for the year is recorded to be 38,238
million USD by Society of Indian automobile Manufacturer (SIAM). For the year 2009-10, the
production rate for different category of vehicles is as followed (As per SIAM)
Passenger Vehicles: 2,351,240
Commercial Vehicles: 566,608
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Three Wheelers: 619,093
Two Wheelers: 10,512,889
Grand Total: 14,049,830
Export Market Statistics
Last year, India's automobile exports had reached $4.5 billion and a consistent export
growth rate can be estimated in the year 2010 also with the estimation that it will cross $12
billion by 2014. As per the SIAM records automobile exports have under gown a growth of
22.30 percent during the current financial year. United Kingdom is largest export market for
India's automobile industry followed by Germany, Netherlands and South Africa. In the year
2009-10, India has made a huge profit by exporting 1,804,619 no. vehicles. Different brands are
utilizing the Indian automobile engineering expertise to manufacture and export maximum no. of
vehicles from their Indian plants.. Similarly, General Motors announced its plans to export about
50,000 cars manufactured in India by 2011. Listed below is the statistics showcasing export sales
rate of Indian automobile industry for the year 2009-10.
Passenger Vehicles: 446,146
Commercial Vehicles:45,007
Domestic Market Statistics
Even in the domestic market, the automobile industry is experiencing tremendous
success. As per statistics launched by Society of Indian Automobile Manufacturers (SIAM),
26
there has been a growth of 32.28% in the domestic car sales, justified from the January 2010
sales 145,905 units against the 2009 sales of 110,300 units. The Commercial Vehicles segment
grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by
1.66 percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Listed below is the
statistics showcasing domestic market sales rate of Indian automobile industry for the year 2009-
10.
Passenger Vehicles: 1,949,776
Commercial Vehicles: 531,395
Passenger Vehicles segment grew at 29.85 percent during April-February 2011 over same
period last year. Passenger cars grew by 30.34 percent, Utility Vehicles grew by 19.69 percent
and Multi-Purpose Vehicles grew by 43.28 percent in this period. February 2011 figures for
domestic sales of Passenger Cars show a growth of only 22.63 percent over the same month last
year. However, in absolute numbers, this segment recorded highest ever sales. Total passenger
vehicle sales figures for February 2011 compared to February 2010 shows growth stands at
20.88 percent.
The overall Commercial Vehicles segment registered growth of 28.65 percent during
April-February 2011 as compared to the same period last year. While Medium & Heavy
Commercial Vehicles ( M&HCVs ) registered growth of 34.18 percent, Light Commercial
Vehicles grew at 24.08 percent. In contrast to the last February sales figures, February 2011
registered a growth of 10 percent.
27
Three Wheelers sales recorded a growth rate of 19.96 percent in April-February 2011.
While Passenger Carriers grew by 22.39 percent during April-February 2011, Goods Carriers
registered growth of 10.31 percent.
Two Wheelers registered a growth of 26.55 percent during April-February 2011. Mopeds,
Motorcycles and Scooters grew by 23.79 percent, 23.30 percent and 44.40 percent respectively.
If we compare February 2011 to February 2010, the growth figures for three and two
wheelers are at 24.03 percent and 22.04 percent respectively.
Exports
During April-February 2011, overall automobile exports registered a growth rate of 30.62
percent. Passenger Vehicles registered decline and the growth rate was (-) 0.86 percent in this
period. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth of
72.82 percent, 59.29 percent and 36.97 percent respectively during April-February 2011. In
February 2011 compared to February 2010, overall automobile exports registered a growth of
27.57 percent.
28
Figure 3.1: Growth of Automobile Industry
3.2: Market Share 2009
Figure 3.3: Expected Market Share 2015
29
Figure 3.4: Expected Market Share 2020
Figure 3.5: Region wise automobile manufactures
Auto Components Industry
Surge in automobile industry since the nineties has led to robust growth of the auto
component sector in the country. In tandem with the industry trends, the Indian component sector
has shown great advances in recent years in terms of growth, spread, absorption of new
technologies and flexibility. Indian auto component industry has seen major growth with the
arrival of world vehicle manufacturers from Japan, Korea, US and Europe. Today, India is
emerging as one of the key auto components center in Asia and is expected to play a significant
role in the global automotive supply chain in the near future. The auto component industry is
also expected to drive the growth of the engineering sector in view of its strong downstream and
upstream linkages with many other segments of the engineering sector like raw materials, capital
goods, intermediate products etc. Auto component industry supports industries like automobiles,
30
machine tools, steel, aluminum, rubber, plastics, electrical, electronics, forgings and machining.
India has also emerged as an outsourcing hub for auto parts for international companies such as
Ford, General Motors, Daimler Chrysler, Fiat, Volkswagen, and Toyota.
Auto Policy
Vision
To establish a globally competitive Automotive Industry in India and to double its
contribution to the economy by 2010.
Objectives
This policy aims to promote integrated, phased, enduring and self-sustained growth of the
Indian automotive industry. The objectives are to:-
(i) Exalt the sector as a lever of industrial growth and employment and to achieve a high degree
of value addition in the country;
(ii) Promote a globally competitive automotive industry and emerge as a global source for auto
components;
(iii) Establish an international hub for manufacturing small, affordable passenger cars and a key
center for manufacturing Tractors and Two-wheelers in the world;
(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local
industry;
(v) Conduce incessant modernization of the industry and facilitate indigenous design, research
and development;
(vi) Steer India's software industry into automotive technology;
(vii) Assist development of vehicles propelled by alternate energy sources;
31
(viii) Development of domestic safety and environmental standards at par with international
standards
Commercial Vehicle Industry in Top Gear
Approximately 66% of the goods and 87% of the passenger traffic moves via road. This
makes the commercial vehicle (CV) Industry, the lifeline of Indian economy. The Industry is the
fourth largest manufacture of CVs in the world. The industry is overwhelmingly dominated by
Tata Motors with Ashok Leyland and Mahindra & Mahindra being distant second and third.
Eicher Trucks and Buses and Swaraj Mazda are some other Indian players in the space. The
industry is cyclical as it draws it demand from the economy. The capital intensity and the high
susceptibility to the technology changes raise the entry barriers to the industry making it an
oligopolistic market. The demand dynamics of the industry is dependent on the general health of
the economy, infrastructure facilities, regulatory environment (emission, loading, aging norms
etc.), interest rates scenarios, freight rates and fuel costs .In addition, prices of vehicles, their
specifications and applications, fuel efficiency, technological conformity, spare parts availability
and manufacturer’s service center network sway the consumer preference significantly.
The evolving Hub & Spoke model of distribution; improved road infrastructure and
Supreme Court ban on overloading of vehicles have brought about a shift in the consumer
demand. The demand has shifted away from vehicles with GVW >12 to <=16.2 tones (9 tones
payload carrying vehicle) to vehicles with GVW <=3.5 tones and GVW>16.2 tones (multi axle
vehicles & tractor trailers).The market is now also witnessing increased specialization, with
increased specialization, with application oriented vehicles viz. cement mixer, LPG carrier,
defense vehicles etc being introduced. As Indian CV manufactures are making global forays, so
are the global players making Indian forays. MAN AG, International Trucks and Engines
Corporation have entered the M&HCV segment through the JV route. Hyundai, Scania, Stokota,
32
Ural are some other International players who have plans to enter the Indian CV market. The
competition from local players is also expected to intensify with Bajaj Auto and Piaggio entering
the CV market. Moreover, the existing players’ viz. Tata Motors, Ashok Leyland have also
planned huge capacity expansions.
Supply Chain of Automobile Industry
The supply chain of automotive industry in India is very similar to the supply chain of the
automotive industry in Europe and America. The orders of the industry arise from the bottom of
the supply chain i. e., from the consumers and go through the automakers and climbs up until the
third tier suppliers. However the products, as channeled in every traditional automotive industry,
flow from the top of the supply chain to reach the consumers. Automakers in India are the key to
the supply chain and are responsible for the products and innovation in the industry.
The description and the role of each of the contributors to the supply chain are discussed
below.
Third Tier Suppliers: These companies provide basic products like rubber, glass, steel,
plastic and aluminum to the second tier suppliers.
Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier
Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They
also provide engineering resources for detailed designs. Some of their services may include
welding, fabrication, shearing, bending etc.
First Tier Suppliers: These companies provide major systems directly to assemblers.
These companies have global coverage, in order to follow their customers to various locations
around the world. They design and innovate in order to provide “black-box” solutions for the
33
requirements of their customers. Black-box solutions are solutions created by suppliers using
their own technology to meet the performance and interface requirements set by assemblers.
First tier suppliers are responsible not only for the assembly of parts into complete units
like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-
tier suppliers. Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs):
After researching consumers’ wants and needs, automakers begin designing models which are
tailored to consumers’ demands. The design process normally takes five years. These companies
have manufacturing units where engines are manufactured and parts supplied by first tier
suppliers and second tier suppliers are assembled. Automakers are the key to the supply chain of
the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota,
and Honda. Innovation, design capability and branding are the main focus of these companies.
Dealers: Once the vehicles are ready they are shipped to the regional branch and from
there, to the authorized dealers of the companies. The dealers then sell the vehicles to the end
customers. Parts and Accessory: These companies provide products like tires, windshields, and
air bags etc. to automakers and dealers or directly to customers. Service Providers: Some of the
services to the customers include servicing of vehicles, repairing parts, or financing of vehicles.
The production of automobiles has greatly increased in the last decade. It passed the 1 million
mark during 2003-2004 and has more than doubled since
In tune with international standards to reduce vehicular pollution, the central government
unveiled the standards titled 'India 2000' in 2000 with later upgraded guidelines as 'Bharat Stage'.
These standards are quite similar to the more stringent European standards and have been
traditionally implemented in a phased manner, with the latest upgrade getting implemented in 13
cities and later, in the rest of the nation. Delhi(NCR), Mumbai, Kolkata, Chennai, Bangalore,
Hyderabad, Ahmadabad, Pune, Surat, Kanpur, Lucknow, Sholapur, and Agra are the 13 cities
34
where Bharat Stage IV has been imposed while the rest of the nation is still under Bharat Stage
III
35
Figure: 3.6: Supply chain process
36
3.2 Volvo Eicher Commercial Vehicles Profile
VE Commercial Vehicles Limited owes its inception to the compelling intent of driving
modernization in commercial transportation, in India and other developing markets.
As a 5050 joint venture between the Volvo Group (Volvo) and Eicher Trucks and Buses
Limited (EML), VE Commercial Vehicles (VECV) incorporates unique abilities to be able to do
so. The organization brings together global leadership in technology along with deep knowledge
and experience of the Indian commercial vehicle (CV) market.
As a company, VECV includes the complete range of Eicher’s commercial vehicles,
components and engineering design businesses as well as the sales and distribution of Volvo
trucks. Thus, each of its business units is already wellestablished and backed by a sizable
customer base.
VECV’s portfolio of commercial vehicles includes two product brands with absolutely
different market positions yet complementing segment synergies. EicherTrucks&Buseshave a
wide offering in the mass market, 5T40T range while Volvo Trucks command a strong presence
in the premium, high performance, and heavy duty segments from 25T49T. With a formidable
presence in the existing light and medium duty segments, VECV’s main focus is on increasing
the penetration and market share of its heavy duty products. Thus, its investments in design,
development, manufacturing, systems, distribution and services are largely oriented towards
creating a stronger position in the heavy duty market.
VECV is going all out to gear itself in becoming a proactive solutions and service
provider meeting all customer needs. This it will do by strengthening each of its product brands
as leaders in their respective segments. In the near course, VECV will offer an even more
37
innovative lineup of technologically advanced and ergonomically aesthetic products. Volvo’s
widespread distribution network will facilitate the export of these products to countries
worldover and will help VECV bolster its presence in more than 26 countries to where it
currently exports. With an improved thrust on retail network development and after sales service,
VECV will soon come to be recognized as a lean organization capable of setting new
benchmarks in response times.
It is important for VECV, that its growth must also have a positive influence on the
industry it serves; ensuring that the industry becomes more efficient, environment friendly, offers
safer products and manufactures products that are driver friendly. And this dictum of being the
‘differentiator’ not only reflects in VECV’s approach in the market place but also in its internal
workplace – moving it to becoming a preferred employer in the industry.
VE Commercial Vehicles has over 4000 employees with a sales & support network that
spreads across more than 300 points across the country. The company’s industrial base includes
an integrated commercial vehicle factory in Pithampur producing Eicher trucks & buses along
with factories in Thane, Gurgoan and Dewas dedicated to manufacturing gear boxes and gear
box assemblies.
VECV is jointly managed by Volvo and EML with shared management and equal
representation rights on the board of Directors. All management positions are appointed by the
board. Mr. Par Ostberg (Chairman, Trucks Asia, Volvo Group) is VECV’s chairperson while Mr.
Siddhartha Lal is the Managing Director and CEO. Operational since July 2008, VE Commercial
Vehicles is headquartered at New Delhi.
Eicher Trucks and Buses
38
Eicher Trucks and Buses was founded in 1982 to manufacture a range of reliable, fuel-
efficient commercial vehicles of contemporary technology. The unit manufactures and markets
commercial vehicles with Gross Vehicle Weight (GVW) ranging from 5-25 tons.
Today, Eicher Trucks and Buses is one of the leading manufacturers of commercial
vehicles in India with a 33% market share in the 7T-11T segment. The success and growth of
this unit is a result of various customer-driven strategies. The manufacturing facility is situated in
Central India – Pithampur, Madhya Pradesh. Eicher Trucks and Buses has stepped into the
Heavy Commercial Vehicle segment with its state-of-the-art HCV, the "Eicher 20.16", the first
commercial vehicle designed and developed indigenously.
Eicher Trucks and Buses functions through a strong three-tier service network
consisting of authorized distributors, service centers and company trained private mechanics.
The vehicles are sold and serviced through a network of over 576 Authorized Contact Points all
over India, supported by service centers and over 4500 company trained private mechanics,
which are close at hand on all major highways throughout India to provide initial "first aid" to
the vehicles if required.
EICHER VISION
• To be one of the three commercial vehicle manufacturers in India meeting customer
needs anywhere anytime.
• To be a prosperous company with a commitment to invest in the development of our
engineering capabilities and our future group.
• To be seen as a value driven organisation caring for irs employees and all other
stockholders.
EICHER MISSION
39
• To provide competitive commercial vehicles and related service of quality exceeding
customer expectation.
• To be innovative in all that we do and be responsive to our internal and external customer
needs.
WORK CULTURE IN EICHER
• Professional
• Participative
• Freedom at work
• Learning Environment
• Focused social goal
• Law binding
EICHER VALUES
• Ethical practices - Legal, Social, Personal, Conscience framework.
• Fairness - No bias against any of the shareholder.
• Human Approach - Encourage individual growth to the fullest potential.
• Openness - Transparency of action & thoughts.
• Empowerment – Encourage people to take risk, tolerance, mistakes and learns from them.
• Customer Orientation – Awareness that every transaction has a customer than to
recognise his needs and to delight them.
• Total Quality – Excellence in everything we do and enable self-actualisation.
• Secular - Without any bias against those with different or certain belief.
• Apolitical – Keeping away from political influences.
• Trust – Relationship, which allows openness and sharing of true feelings.
40
Product Range
Leveraging its in-house expertise, Eicher Trucks and Buses has successfully developed
a wide range of commercial vehicles to meet the varying customer needs. These vehicles deliver
value by providing low cost of ownership and increased profitability to our customers. The range
offered includes fully built up Trucks - ranging from 5T to 40T, Buses and Chassis. All these
products can be offered in BSIII Compatibility.
Trucks Buses Bus Chassis
Functions & Activities of ETB
Figure 3.7: Hierarchy of different departments in VECV
Activities of Product Development (R&D)
• Development of new products
• Up gradation of current products
• Design of new products
• Prototype development
• Product testing & validation
• Aggregate development (Engine, Transmission, Axle)
• Resolution of Perennial Field Quality Issues
41
Activities of Materials & Supply chain
• New parts development
• Supplier Management
• Part Costing & pricing
• Commodity buying
• APQP (Advanced Product Quality Planning), PPAP (Production Part Approval Process)
• Part scheduling
• Logistics
• Part packing & Handling
• Ware housing
• In house part supply
Activities of Quality
• Suppler quality engagement
• Part quality
• Receipt quality
• Aggregate in line quality assurance
• Vehicle assembling quality assurance
• Final inspection
• Warranty
Activities of Production
42
• Aggregate assembly
• Final vehicle assembly
• Line quality systems
• Workmen management
• Shop floor discipline & process
• Plant maintenance
Activities of Technical Services
• Design of Tools, Jigs & Fixtures
• Capital investment planning & procurement
• Civil construction
• Line Engineering
• Productivity improvement.
Activities of Marketing & Sales
• Identification of product requirement
• Product specifications
• Market development
• Market promotion
• Dealer management
• Vehicle sales
• Vehicle after market services
• Customer management
43
• Customer Satisfaction
• Market share improvement
Materials Functions & Activities
Figure 3.8: Functions in materials Department
Development Department
Key Activities:
• Part development for new products through APQP & PPAP route
• Supplier capacity assessment & aligning with Business needs
• Concept (Proto) Part Development
• New Ancillaries – Need Identification & Induction in Supply chain
• Part development – alternate sourcing
Procurement Department
Key Activities:
• Scheduling ,Ordering & Procurement
• Single point contact with suppliers for all supply related issues
• Close coordination with PPC and Sales ensuring Timely Deliveries
• Inventory monitoring and control
• Ensuring Production Line capacity Utilization
• Driving supply chain productivity
44
Supplier Up gradation
Key Activities:
• Enhancing supplier quality to Desired Levels
• Driving supplier quality excellence
• Long term Quality Infrastructure & approach at suppliers
• Effective Line Utilization by minimizing Part Quality losses
• Driving Force for CSI-1 activities within Materials
Strategic Sourcing
Key Activities:
• Buying strategies- Long term & Short term
• Price settlement of all the Commodities & parts (OEM&OES)
• Source Induction & Approval
• Driving Purchasing Excellence
• Material Cost - Budgeting & control
• Cost Reduction Projects & LCC sourcing
• Material Control - MIS , MRP
Stores and Logistics
Key Activities:
• Ensuring Timely Supplies with Effective logistics
• Warehousing – In-house & Outside
• Supply to Production Lines
45
• Inventory Control
Study covers the area of
• Studying the buying process of the raw material, collecting the blank sizes of the parts.
• Calculating the cost of the blanks, total cost as per the thickness from the existing
method, visiting the suppliers and physically checking the blank sizes.
• Making the proposals by varying the width and length by the standards of the steel mills,
visiting the steel processing centres to know the practically possible proposals.
• Calculating the savings by comparing the existing method with the proposals
List of Supplier
Automan
Belmaks
Bhagwan
Caparo
sCaparo II
Galaxy
Gatiman
Genius
Himech
Hitech
Metal Profile
REPL
Suneel Auto
Table 3.1 List of suppliers
46
ANALYSIS
The data of parts from various suppliers is collected. According to that the blank sizes of
different parts are collected. After collecting the data, the total data is consolidated according to
the thickness from that list. Then the total quantity of the material procured per year is collected,
and segregated them according to the thickness .Then number of blanks for the each component
by the existing method of sheet size is calculated. After finding the optimum number of blanks,
from that the blank weight and blank cost per year in Rupees lakhs for each component is
calculated. The blank costs of the each component are summated according to the thickness wise.
The concern is to minimize this cost by increasing the number blanks per each sheet. This can be
achieved by varying the widths and even by this the material wastage can be reduced. With the
standard widths available with the steel mills the sheet dimensions are altered and then the
number of blanks and the total yield for each dimension is calculated. Based on this proposals
are made and those details are explained along with the tables.
47
For thickness 12mm
The dimensional data of different parts of 12mm thickness are analyzed to know the
existing blank cost and scrap cost.
12 mm Thickness Savings
Blank scrap Blank scrap
cost cost cost cost

185.2
0.00
existing cost 9 4.49 0
167.1
1.14
proposal 1 3 3.35 18.16
165.9
1.77
proposal 2 3 2.72 19.36
171.8
-1.37
proposal 3 9 5.86 13.40
Table 4.1: Blank Cost and Scrap Cost for 12mm Thickness
Figure 4.1: Proposals for blank cost and scrap cost for 12mm
From the analysis it was found that existing blank cost is Rs.185.29 lakhs. For proposals,
it was found that blank cost and scrap costs are varying according to the width. For width
1500mm the blank cost is reduced to Rs.167.13 and the scrap cost is Rs.3.35 lakhs, similarly for
widths 1400mm & 1100mm the blank costs are Rs.165.93 lakhs, Rs171.89 lakhs and scrap costs
are Rs 2.72lakhs, Rs 5.86 lakhs. By changing the dimensions the possible saving from proposal 1
is Rs.18.16 lakhs and the scrap cost can be reduced to Rs 1.14 lakhs. For Proposals 2&3 savings
on blank cost are Rs 19.36 lakhs, Rs 19.40 lakhs. Saving on scrap cost from proposal 2 is Rs.1.14
48
lakhs & from proposal 3 even though there is a lot of savings on the blank cost, the scrap cost is
increasing due to poor orientation of blank. This was plotted in the line graph above.
49
For thickness 10mm
for 10 mm Savings
Blank scrap blank scrap
cost cost cost cost

existing
45.17
cost 0.7 0 0
proposal 1 45.66 0.9 -0.49 -0.2
proposal 2 45.80 1.04 -0.63 -0.34
proposal 3 44.39 0.3 0.78 0.4
From the analysis it was found that existing blank cost and scrap costs are Rs.45.17 lakhs,
Rs 0.7lakhs. For proposals it was found that blank cost and scrap costs are varying according to
the width. For width 1500mm the blank cost is to Rs.45.66 and the scrap cost is Rs.0.9 lakhs,
similarly for widths 1400mm & 1100mm the blank costs are Rs.45.80 lakhs, Rs 44.39 lakhs and
scrap costs are Rs 1.04 lakhs, Rs 0.3 lakhs. By the dimensional changes for this thickness there is
no possible savings from the proposal 1&2. From the proposal 3 the possible savings for the
blank cost ad scrap costs are Rs.0.78 lakhs & Rs 0.4 lakhs. This was plotted in the line graph
below.
50
For thickness 9mm
for 9mm saving

cost cost cost cost

existing 312.4
cost 8 22.7 0 0
proposal 220.6
1 5 22.48 91.83 0.22

proposal 209.1
2 0 16.39 103.39 6.31

proposal 200.7
3 1 11.98 111.77 10.72

Table 4.3: Blank
Cost and Scrap Cost for 09mm Thickness
From the analysis it was found that existing blank cost and scrap cost is Rs312.48 lakhs,
Rs 22.7 lakhs. For proposals it was found that blank cost and scrap costs are varying according to
the width. For width 1500mm the blank cost is to Rs 220.65 and the scrap cost is Rs.22.48 lakhs,
similarly for widths 1400mm & 1100mm the blank costs are Rs.209.10 lakhs, Rs 200.71 lakhs
51
and scrap costs are Rs 16.39 lakhs, Rs 11.98 lakhs. The possible savings from the proposals 1,
2&3 on blank cost are Rs.91.83 lakhs, Rs 103.39 lakhs, Rs.111.77 lakhs. The savings on scrap
cost are Rs 0.22 lakhs, Rs .6.31 lakhs, Rs.10.72 lakhs. This was explained with the help of line
graph.
52
For thickness 8mm
for 8mm Saving

cost cost cost cost

existing
39.20
cost 1.81 0 0
proposal
39.60
1 2.2 -0.40 -0.39
proposal
39.39
2 2.09 -0.19 -0.28
proposal
40.39
3 2.62 -1.19 -0.81
From the analysis it was found that existing blank cost and scrap cost is Rs 39.20 lakhs,
the width. For width 1500mm i.e. proposal 1 the blank cost is to Rs 39.60 and the scrap cost is
Rs 2.2 lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs.39.39 lakhs, Rs
40.39 lakhs and scrap costs are Rs 2.09 lakhs, Rs 2.62 lakhs. The components of 8mm thickness
are compact and used as supports. For these compact parts the dimensional changes has less
53
impact on the blank cost and scrap cost. Hence for 8mm thickness the savings are negligible.
This was plotted in the line graph above.
54
For thickness 6mm:
Most of the parts in the sheet metal are manufactured with this thickness. The
dimensional data of different parts of 6mm thickness are analyzed to know the existing blank
cost and scrap cost.
for 6mm Saving

cost cost cost cost

existing 2682.
cost 62 37.78
proposal
2649.
1(1500mm
38
) 32.86 33.23 4.92
proposal
2658.
2(1400mm
20
) 37.5 24.42 0.28
2649.
proposal 3 82 33.09 32.80 4.69

From the analysis it was found that existing blank cost and scrap cost is Rs 2682.62
lakhs, Rs 37.78 lakhs. For proposals it was found that blank cost and scrap costs are varying
according to the width. For width 1500mm the blank cost is to Rs 2649.38 and the scrap cost is
Rs.32.86 lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs.2658.20 lakhs,
Rs 2649.82 lakhs and scrap costs are Rs 16.39 lakhs, Rs 11.98 lakhs. The possible savings from
55
the proposals 1, 2&3 on blank cost are Rs.33.23 lakhs, Rs 24.42 lakhs, Rs.32.80 lakhs. The
savings on scrap cost are Rs 4.92 lakhs, Rs .0.28 lakhs, Rs.4.69 lakhs. This was plotted in the
line graph above.
56
For thickness 5mm
for 5mm saving

cost cost cost cost

existing 693.6
cost 6 65.82
proposal 640.2
1 7 52.12 53.39 13.7

proposal 677.7
2 4 71.84 15.92 -6.02

proposal 640.8
3 9 52.45 52.77 13.37

Rs 65.82 lakhs. For proposals it was found that blank cost and scrap costs are varying according
to the width. For width 1500mm the blank cost is to Rs 640.27 lakhs and the scrap cost is
Rs.52.12 lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs.677.74 lakhs, Rs
640.89 lakhs and scrap costs are Rs 71.84 lakhs, Rs 52.45 lakhs. The possible savings from the
proposals 1, 2&3 on blank cost are Rs.53.39 lakhs, Rs 15.92 lakhs, Rs.52.77 lakhs. The savings
on scrap cost for proposal 1&3 are Rs 13.7 lakhs, Rs.13.37 lakhs. For proposal 2 as the scrap
generation is more there is no savings. This was plotted in the line graph above.
57
For thickness 4.8mm
The dimensional data of different parts of 4.8mm thickness are analyzed to know the
for 4.8
mm Saving
cost cost cost cost

existing
72.25
cost 2.5
proposal
70.23
1 1.62 2.02 0.88
proposal
72.16
2 2.64 0.09 -0.14
proposal
76.65
3 5.01 -4.40 -2.51
Table 4.7: Blank Cost and Scrap Cost for 4.8mm Thickness
Figure 4.7: Proposals for blank cost and scrap cost for 4.8mm
the width. For width 1500mm the blank cost is to Rs 70.23 lakhs and the scrap cost is Rs.1.62
lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs.72.16 lakhs, Rs 76.65
lakhs and scrap costs are Rs 2.64 lakhs, Rs 5.01 lakhs. The possible savings from the proposals
1, 2 on blank cost are Rs.2.02 lakhs Rs 0.09 lakhs. The savings on scrap cost for proposal 1 are
Rs 0.88 lakhs. This was plotted in the line graph above.
58
For thickness 4.5mm
for 4.5
mm saving
cost cost cost cost

existing 360.6
cost 5 38.08
proposal 354.2
6.44
1 1 35.91 2.17
proposal 336.3
2 7 26.52 24.27 11.56

proposal 326.3
3 0 21.22 34.35 16.86

to the width. For width 1500mm the blank cost is to Rs 354.21 lakhs and the scrap cost is Rs
35.91 lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs 336.37 lakhs, Rs
proposals 1, 2 &3 on blank cost are Rs 6.44 lakhs, Rs 24.27 lakhs, Rs 34.35 lakhs. The savings
59
on scrap cost for proposals 1, 2&3 are Rs 2.17 lakhs, Rs 11.56lakhs, Rs 16.86 lakhs. This was
plotted in the line graph above.
60
For thickness 4.3mm
for
4.3mm Saving
cost cost cost cost

existing
2.91
cost 0.19
proposal
2.65
1 0.08 0.26 0.11
proposal
3.11
2 0.32 -0.20 -0.13
proposal
3.22
3 0.38 -0.31 -0.19
From the analysis it was found that existing blank cost and scrap cost is Rs 2.91 lakhs, Rs
0.19 lakhs. For proposals it was found that blank cost and scrap costs are varying according to
lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs.3.11 lakhs, Rs 3.22 lakhs
and scrap costs are Rs 0.32 lakhs, Rs 0.38 lakhs. The possible saving from the proposal 1 on
blank cost is Rs.0.26 lakhs. The savings on scrap cost for proposal 1 are Rs 0.11 lakhs. This was
plotted in the line graph above.
61
For thickness 4mm
for 4 mm Saving
cost cost cost cost

existing 654.6
cost 3 78.68
proposal 526.9
1 4 38.6 127.69 40.08

proposal 525.0
2 1 37.59 129.61 41.09

proposal 589.1
3 5 71.34 65.48 7.34

proposals 1, 2&3 on blank cost are Rs.127.69 lakhs, Rs. 129.61 lakhs, Rs.65.48 lakhs. The
savings on scrap cost for proposals 1, 2&3 are Rs 40.08 lakhs, Rs 41.09 lakhs, Rs 7.34lakhs. This
was plotted in the line graph above.
62
For thickness 3.9mm
for
3.9mm Saving
cost cost cost cost

existing 108.8
cost 9 13.26
proposal 110.4
1 9 16.33 -1.60 -3.07

proposal 111.6
2 3 16.93 -2.74 -3.67

proposal
96.60
3 9.02 12.29 4.24
96.60 lakhs and scrap costs are Rs 16.93 lakhs, Rs 9.02 lakhs. The saving from the proposal 3 on
blank cost are Rs.12.29 lakhs. The savings on scrap cost for proposals 3 are Rs 4.24 lakhs, Rs
41.09 lakhs. This was plotted in the line graph above.
63
For thickness 3.8mm
for
3.8mm Saving in lakhs

cost cost cost cost

existing
78.02
cost 8.85
proposal
71.13
1 10.39 6.89 -1.54
proposal
66.84
2 8.13 11.18 0.72
proposal
61.42
3 5.28 16.60 3.57
lakhs and scrap costs are Rs 8.13 lakhs, Rs 5.28 lakhs. The savings from the proposals 1, 2&3 on
blank cost are Rs.6.89 lakhs, Rs 11.18 lakhs, Rs.16.60 lakhs. The savings on scrap cost for
proposals 2 & 3 are Rs 0.72 lakhs, Rs 3.57 lakhs. This was plotted in the line graph above.
64
For thickness 3.5mm
for
3.5mm Saving
cost cost cost cost

existing
12.49
cost 0.27
proposal
11.79
1 0.13 0.70 0.14
proposal
11.88
2 0.18 0.61 0.09
proposal
12.14
3 0.32 0.34 -0.05
blank cost are Rs.0.70 lakhs, Rs 0.61 lakhs, Rs.0.34 lakhs. The savings on scrap cost for
proposals 1 & 2 are Rs 0.14 lakhs, Rs 0.09 lakhs. This was plotted in the line graph above.
65
For thickness 3.2mm
for
3.2mm Saving
cost cost cost cost

existing 350.8
cost 9 33.18
proposal 301.6
1 6 25.66 49.22 7.52

proposal 303.7
2 7 26.77 47.11 6.41

proposal 305.5
3 8 27.72 45.31 5.46

305.58 lakhs and scrap costs are Rs 26.66 lakhs, Rs 0.32 lakhs. The savings from the proposals
1, 2&3 on blank cost are Rs.0.70 lakhs, Rs 0.61 lakhs, Rs.0.34 lakhs. The savings on scrap cost
for proposals 1 & 2 are Rs 0.14 lakhs, Rs 0.09 lakhs. This was plotted in the line graph above.
66
For thickness 3.0mm
for 3mm saving

cost cost cost cost

existing 129.9
cost 8 4.82
proposal 127.7
1 9 5.5 2.19 -0.68

proposal 125.9
2 5 4.53 4.03 0.29

proposal 126.0
3 4 4.58 3.94 0.24

the width. For width 1500mm the blank cost is to Rs 127.79 lakhs and the scrap cost is Rs 5.5
lakhs, similarly for widths 1400mm & 1100mm the blank costs are Rs 125.95 lakhs, Rs 126.04
blank cost are Rs 2.19 lakhs, Rs 4.03 lakhs, Rs 3.94 lakhs. The savings on scrap cost for
proposals 2 & 3 are Rs 0.29 lakhs, Rs 0.24 lakhs. This was plotted in the line graph below
67
Table 4.16:Sample of the data collected and tabulated
68
Existing method of Sheet dimensions and calculation of number of blanks, total cost (for
thickness 12mm, 10mm, 9mm)
Table 4.17: Existing Method of sheet dimensions
69
Table 4.18: The consolidated proposals for different thicknesses
70
The dimensions of the existing costs and net savings are plotted above. The total costs for
all thicknesses are summated according to the widths and the savings from it is calculated. The
savings are as follow.
Blank Cost Savings
Width in lakhs lakhs

1250 5890.73
1500 5520.08 370.65
1400 5522.54 368.18
1100 5535.57 355.16
Table 4.19: Over all Savings
Figure 4.16: Overall Savings
For the existing widths (1250mm) the total cost incurred per year is Rs. 5890.73 lakhs
(i.e. 58.90 crores).By varying the widths the total cost can be reduced, for the width 1500mm the
total cost is Rs.5520.08 lakhs. The saving from this is Rs.370.65 lakhs per year. For the width
1400mm the total cost is Rs.5522.54 lakhs, savings from this is Rs.368.18 lakhs, for the
thickness 1100mm the cost per year is Rs.5535.57 lakhs and the savings are Rs.355.16 lakhs.
Proposal for Cut to length
For coil the sheet can be cut according to the required length, based on the dimensions of
the blank. Hence the wastage of the raw material is negligible and by this material utilization can
be optimized and the cost can be reduced. For different thickness the blank weight and cost are
as follows.
71
For the blank size 12mm*294mm*346mm, if this blank has to cut from sheet of
dimension 12mm*1250mm*2500mm.By the existing method after cutting, the blank weight is
10.53kg and if this is cut to the length of the component then the blank weight will reduce to
9.59kg.This method a lot of material can be saved. The cost incurred on the existing method per
year is Rs.29.08 lakhs and by this method it can be reduced to 26.50 lakhs. This was shown
below in the sample of proposal table. For the different thickness the consolidated proposal are
as follows.
For the thickness 12mm the total cost is Rs 178.20 lakhs by the existing method and by
this method the cost reduced to the Rs 169.22 lakhs. The total savings Rs 8.98 lakhs. Similarly
for all thickness the cost by the existing method and the proposal is calculated and the savings
are evaluated. This all thicknesses are summated and the total cost incurred per year and proposal
is calculated and compared with each other. By the existing method the total cost is Rs.17.57
crores and by this proposal the cost can be reduced to Rs.14.97 crores and the savings are
Rs.2.59 crores.
Sample of proposal for cut to length
72
Table 4.20: Proposal for cut to length
Table 4.21: Consolidated proposal for different thickness
73
Blank Development & Yield Improvement (Reference to case study mentioned in problem
statement):
Case Study 01
With the variations in the width of the nesting layout, the number of blanks can be increased. As
clearly mentioned in the Case no. 01 before doing this process the utilization was 61%. With
these new proposals, the utilization was improved to 71.5%
Figure 4.17: Nesting Layout 2 up—Utilization 71.5% , Gross Weight –0.662 kg.
74
5. FINDINGS, SUGGESTIONS AND CONCLUSION
5.1 Findings
 The total cost spending on each component by existing method.
 The ways to optimize the number of blanks by varying the existing sheet dimensions by
finding the possible proposals from the steel mills.
 The total savings by comparing the existing sheet method cost to that proposals.
5.2 Suggestions
 By varying the sheet width to1500mm the total cost is reduced to Rs.5520.08 lakhs from
Rs.5890.73 lakhs. The possible savings are 370.65 lakhs
 By varying the width to 1400mm the total cost is reduced to Rs. 5522.44 lakhs from Rs.
5890.73 lakhs and the savings are Rs.368.19 lakhs
 By varying the width to 1100mm the total cost is reduced to Rs.5535.57 lakhs from Rs.
 By considering the cut to length, total cost is reduced to Rs.1497.69 lakhs from Rs.
75
5.3 Conclusion
The study is concluded by making some practically possible proposals such that the cost
of steel can be optimized by improving the yield of the raw materials and the net savings are
calculated. By these suggestions such as varying the dimensions of the standard sheet that are
possible to produce by the steel mills. For each width the savings are calculated such that cost
optimization can be fulfilled and the scrap generation during the process is minimized. For each
thickness the possible widths and savings can be calculated by using formulae (Annexure 1). The
objectives of the study are successfully accomplished.
Objective 1: Study of blank size based on part number.
Finding: The total blank sizes of the different parts are studied and cost spending on each
component is determined.
Objective2: Consolidating the blank sizes of parts according to the thickness and
calculating the cost per year for each thickness.
Finding: The total blank sizes of the different parts are studied and consolidated
according to the thickness. The cost spending on each component is determined.
Objective 3: Calculate the potential savings from the feasible proposals and calculating
the yield from it.
Finding: The total savings are determined by comparing the existing sheet method cost to
those proposals.
76

Main Subject: Steel Cost Optimization

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1.1.

Main subject : Steel Cost Optimization

Rs.454.71crores, proprietary is Rs.884.84 crores, forging is Rs.199.67 crores, casting accounts to

purchased in the form of coils and standard sheets of dimensions

Figure 1.1: Buying Pattern of Raw Material

(MINR million rupees) 19114.68

highest or maximum result or outcome without regard to cost or expense. Practice of

business problems, optimization is achieved usually by using linear programming techniques of

modules mainly include the structure of product development platform, an information

manufacturing. An information integration framework, called step structure information

Kok and N. Stander

saving of up to 9.4% was reportedly realized.

Supply chain management

Supply chain management (SCM) is the management of a network of interconnected

evaluates the purchasing activities of a company. In a production environment, it is often

applied to nontraditional area such as services or capital.

The steps in a strategic sourcing process are:

1. Assessment of a company’s current spends (what is bought where?)

2. Assessment of the supply market (who offers what?)

4. Identification of suitable suppliers

situation, while minimizing risk and costs)

7. Implementation of new supply structure

8. Track results and restart assessment (continuous cycle)

which then provides them back as a service

a continuous sheet of metal through a roll slitter.

Coil & Sheet

manufacturing the long member.

shear blades, ultrasonic knives and even water jet cutters.

automatically, a few of them work with built in converters.

An important consideration in shape nesting is to verify that the software in question

technology in use, such as:

• When punching, the width of the punch tool must be considered;

• Defects on material that must be discarded;

Hot rolled& cold rolled steel

To maintain a safety factor a finishing temperature is defined above the recrystallization

such as rail tracks.

work piece as much as hot rolling in a single pass.

processes where good.

Existing method of blanking

S. no size(mm) weight size(mm) sheet weight

2 6 BKT. SPRING BRAKE ACT. RH 0 294.75 1 36

3 5 BKT. SPRING BRAKE ACT. LH 0 294.75 1 36

4 8 BKT. SPRING BRAKE ACT. LH (MCV) 0 294.75 5 27

5 7 SPACER (15.16) 0 294.75 0 90

6 5 BKT. SPRING BRAKE ACT. RH 0 294.75 0 35

7 5 BKT. SPRING BRAKE ACT. RH 0 294.75 0 35

8 4 BKT. SPRING BRAKE ACT. LH 0 294.75 0 35

9 4 BKT. SPRING BRAKE ACT. LH 0 294.75 0 35

suppliers for the sheet metal.

is a sub function of Materials & Supply Chain Department.

any and suggest measures to reduce wastage through

• Study of blank size on part number

year for each thickness.

2.3 Scope of the study

understanding of the manufacturing technologies at the company.

The standard sheet of dimensions (Thickness*1250mm*2500mm) is sheared into blanks

software in three cases for different components.

Blank Development & Yield Improvement

Case Study 01-

Figure 2.1: Component and Blank Development

Figure 2.2:Nesting Layout One up—Utilization 61%, Gross Weight—0.778 kg

metal was collected from the steel mills.

The standard sheet of dimensions (Thickness1250mm2500mm) is sheared into blanks