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MANAGEMENT INFORMATION
SYSTEM OF
UNDER THE GUIDANCE OF DR.
RAHUL
SUBMITTEDDE
BY
1
Prologue
Avik Dey, a first year student of IIM
Bangalore got the opportunity to learn
about Management Information Systems
and its implications in various industries
during the course of learnings in first
year. He was working with JSW Steel as
an Assistant Manager in the Department
of Technology Excellence for 3.5 years
before joining IIMB. Coming from the
manufacturing
industry
himself,
it
excited him to analyze the impact of
bringing
Management
Information
Having been a part of JSW Steel, he was
certain that there are many loopholes in
the production process, starting from the
time the order is placed till the delivery
time that can be corrected by using
comprehensive and integrated systems like
Manufacturing Execution System. He finally
decided to contact the senior level
employees of JSW to understand the
It was then that he realized that there
exists limited data due to lack of
documentation in Indian steel industry. He
was also guided to refer to some papers
on MES in manufacturing sector as well as
to understand the implementation by
other multinational firms and come up
with an exhaustive assessment of MES
2
The Indian iron & steel industry is century old, with Tata Steels Jamshedpur
plant being the first integrated steel plant set up in 1907. With the current
growth in infrastructure development and rising demand of automobiles,
Indian steel industry is expected to reach 104 MT by 2017, which will make
India the second-largest steel producer in the world with top 3 players as RINL
(GOI undertaking company), Tata Steel and JSW steel.
JSW Steel Ltd is one of the lowest cost and worlds sixth most competitive steel
maker as per the World Steel Dynamics World-Class Steelmaker Rankings,
2015. Supported by the state-of-the-art technologies, JSW Steel boasts of an
installed capacity of 14.3 MTPA with an integrated steel manufacturing facilities
starting from raw material processing units to the end products such as hot
rolled and cold rolled mills with the widest product portfolio in India. Over the
last one decade, JSW Steel has grown across 100 countries and 5 continents.
But the supply glut in China has made things unfavorable for JSW by dumping
cheap steel into India. JSW steel Ltd. reported consolidated net loss of INR
913.20 crore as compared to net profit of INR 1,734.19 crore in the
corresponding period of the previous year. Its consolidated revenue for the
period stood at INR 31,181.36 crore, registering decline of 22.76% YoY. Though
Indian steel companies have modernized with time but have not yet fully
exploited the potential of information technology in making the entire value
chain efficient, unlike China where government itself has realized the
importance of Advanced Management Information System (MIS) and is
supporting the steel players.
Management Information
Systems
Management Information
Systems
Overviews & Trends
In recent years most industrial sectors have realized that if you are at the
lower end of technology, you may miss out on some of the key benefits it can
provide. According to the latest forecast by Gartner Inc. the worldwide
spending on IT will reach $3.5 trillion in 2015. From Exhibit 1, the global trends
in the expenditure can be seen. A 5.5 percent decline from 2014, is attributed
to the decline to the rising U.S. dollar and the market is projected to grow at
4
2.5 percent in constant-currency
terms. A glimpse of the relative expenditure
of different sectors on IT can be seen in Exhibit 2. The data for the Indian
industries can be seen in Exhibit 3.
Existing IT Infrastructure in
JSW Steel
The proven past experience and skill-set in SAP and Oracle applications of JSoft
has helped in catering to the needs of different sub-departments of JSW Steel.
It has implemented a management information system for the JSW plant
operation in Bellary.
Figure 2: In the JSW Value chain, the units on the steel-making and further side are
mostly level-3, whereas those on the raw material extraction and handling side are
SAP FICO module helps in storing the financial transactions data and in creating the profit and loss
6 module consists of sub-modules such as general
statement and balance sheet statements. This
SAP SD module deals with all the activities of sales and distribution such as
sales orders and sales returns, quotes and inquiries, scheduling agreements
and contracts, back orders and subsequent deliveries. The sub-modules
under this module are sales, sales support, shipping, billing, transportation
and credit management etc. SAP MM module supports different phases of
material management such as inventory, goods received, material storage
and procurement etc. Some of the sub-modules of this module are vender
valuation, statutory requirements and material planning. SAP QM module
deals with quality of both input and output products. The four primary
components of SAP QM module are inspection plan, quality notification,
quality inspection and reports. SAP PP module takes care of all the processes
related to production. Different sub-modules of SAP PP are capacity
requirement planning, long term planning, sales operation planning and data
management.
The plant maintenance module is the most important module out of all the
above modules. The PM application module supports planning, processing
and completion of the plant maintenance tasks. Apart from keeping track of
plant maintenance cost and resources, it also provides information to improve
decision making ability and concerns regarding plant maintenance. Some of
the key elements of PM application include: service management,
maintenance planning, and maintenance of bill of materials, plant
maintenance information system and processing of unplanned tasks.
Limitations of SAP
Apart from that, SAP software poses a major disadvantage in terms of the
limited level of customization and implementation they allow. In many cases
the customization required is either not allowed or the software is too rigid
and too difficult to adapt to the unique workflow and business procedures.
Often, in the process of customization the system gets over-engineered while
pertaining to the actual needs of the customer.
MES as a Solution
ERP has been implemented across JSW Steel Ltd. for automating and
integrating the business processes through a common and unified data which
has resulted in significant increase in consistency, predictability and flexibility
of enterprise operations. However, there are certain business processes
which are still not covered under the SAP implementation as well as the
existing modules have some redundancy and limitations. Hence, the question
that needs to be answered is whether they can achieve seamless automation
of the shop floor. The answer lies in Manufacturing Execution System or MES.
While ERP covers many enterprise wide activities at the business level,
certain aspects like planning, scheduling, tracking, and optimization of
production at the shop level are not yet adequately addressed by the ERP
suite. The MES application can address the shop level issues on a real time
basis and supplement the events and processes across all levels.
MES is implemented between the layers of ERP at the top and the process
automation at the bottom. A visual framework on the position of MES at the
multi-tier automation hierarchy is illustrated below (Figure 4).
Thus the successful implementation of MES, that forms the link between
Automation at base level and ERP at the firm wide level, will open up the
possibility of developing an Information Backbone of the manufacturing
enterprise. MES, linking all levels of business and production activities, holds
out the promise of full integration with complete visibility of processes and
resources in the form of inventory of materials, productivity and utilization of
the capital assets, status of customer orders etc. MES, when properly
conceived and implemented at the production environment involving the
shops and mills of a manufacturing plant contributes significantly in
improving the companys bottom-line by cutting costs,
avoiding wastages and
9
improving profit margin.
Tata Steel
SAP ERP has helped Tata Steel in integrating business processes and
practices across the organization. It has also helped achieve a robust level of
optimization. An example is the practice of order balancing to plan the daily
production volume. Implementation of SAP ERP in human resources, finance,
sales, procurement and other support functions has been high. But, it lags
behind when it comes to the core operations where many bottlenecks, such
as that of data acquisition, exist. These shortcomings are faced mainly on the
shop floor and hinder smooth implementation of SAP.
A one-stop solution for these problems seems to be the implementation of
Manufacturing Execution System (MES), which would enable better
monitoring and control of manufacturing operations. MES is being
implemented on a pilot basis in the Kalinganagar plant of TATA Steel in
Odisha. The state-of-the-art plant is going to be commissioned soon, and a
high level of automation is the objective.
There has always been a debate over the costs and benefits of
implementation of any new technology in Tata Steel, be it SAP or something
as simple as a new reporting tool. The same is true for MES too, especially
when someone takes into account the large scale on which MES needs to be
implemented.
Mr. Shrijan Choudhary, Manager-IT of Tata Steel IT Services
division had similar views, The level of success of implementation in
the Kalinganagar plant will determine whether they would go ahead
with the same in the bigger Jamshedpur plant, where the challenge is
even tougher, owing to the fact that the plant was commissioned over
a 100 years ago - in 1907. Though most of the units have been
replaced with advanced ones since then, achieving a system in which
all units talk with each other is still an expensive and complicated
affair.
Nevertheless, it is clear that MES is the next step towards futures plants what is the right time to move towards MES is the question being debated on
today.
Though, domestic companies are still drifting towards the incorporation of
MES, the global steel and iron industry players are a step ahead with virtually
all leading Chinese iron and steel industry players having their own
customized MES in place. Also, as mentioned before ThyssenKrupp CSA, an
integrated steel plant in the Brazilian state of Rio de Janeiro, implemented a
manufacturing execution
10 system to improve cost insight as their slap
production cost was exceeding the fair market value.
Thus, it can be clearly said that MES helps in planning daily schedules in the
Decision time
Avik has gained a lot of insights about
the existing IT infrastructure in JSW
and the areas of improvement. He has
also gained a perspective about the
current trends and benefits of MES in
the Indian Steel Industry. Keeping in
mind that the Steel Industry is turning
out to be highly competitive, he faces
a decision problem while making his
final proposition to JSW Steel.
Should he propose a revamp of the IT
systems and upgradation to MES?
Should he suggest improvements in
the existing SAP/ERP implementations
to make them more customized for
the business requirements keeping in
mind the whole cost-benefit issue
pertaining to establishing MES in the
12
Exhibit #1
Exhibit #2
13
Exhibit #3
14
Exhibit #4
15
Purdue Reference Model, 95 provides a model that end users, integrators and vendors can share in
integrating applications at key layers in the enterprise.
Type of
Automati
on
Type of
Systems
Working Criteria
Level #1
Intelligent
devices
Sensing and
manipulating the
physical processes
Level #2
Control
systems
Supervising,
monitoring and
controlling the
physical processes
Level #3
Manufacturing
operations
systems
Managing
production workflow
to produce the
desired products
5. You mentioned something about level-2 systems. Can you please elaborate on that?
Basically level #1 systems are intelligent devices consisting of sensors whose work is sensing and
manipulating the physical processes. Level #2 systems are the control systems; supervising,
monitoring and controlling the physical process. Level #3 systems are the manufacturing operations
systems, managing production workflow. We have till level #3 systems here in JSW.
6. According to you what are the advantages of SAP implementation?
Currently SAP has no such cost advantage. The primary benefit we are getting is, information
transparency across all units starting from shop floor to top floor. The improved productivity and
decreased manpower requirement numbers are not so significant.
7. Have you faced any road block while implementing SAP?
The problem here is, many units in JSW have not yet come up to the level of entirely level 2 or higher
level systems. For example the Ore Beneficiation unit still has level 1 flow meter and density meter
sensors. In these scenarios, level 1 systems data comes to JPOD and SAP collects the data from JPOD
since level 1 systems do not store the data permanently. Apart from that, SAP software poses a major
disadvantage in terms of the limited level of customization and implementation they allow. In many
cases the customization required is either not allowed or the software is too rigid and too difficult to
adapt to the unique workflow and business procedures. Often, in the process of customization the
system gets over-engineered while pertaining to the actual needs of the customer.
8. So what is the future of SAP in JSW? Are you planning to upgrade the systems?
The existing MIS scenario can be improved by implementing level 5 systems as optimization to level 5
will result in better forecasting, planning and optimization of rolling capability. But currently there is no
plan to upgrade the above because of the financial issues not only in JSW Steel Ltd., but also in the
whole Indian steel sector because of the cheap steel dumping by China into the Indian market.
SAP FICO module helps in storing the financial transactions data and in creating the profit and loss
statement and balance sheet statements. SAP SD module deals with all the activities of sales and
distribution such as sales orders and sales returns, quotes and inquiries, scheduling agreements and
contracts, back orders and subsequent deliveries. SAP MM module supports different phases of material
management such as inventory, goods received, material storage and procurement etc. SAP QM
module deals with quality of both input and output products. SAP PP module takes care of all the
processes related to production.
3. How the output data of SAP are represented and interpreted?
There are two types of data that are obtained as an output from SAP i.e., master data and transaction
data. One of them is functional location in SAP. Functional Locations of different hierarchies (can be
linked to one another. In this way, you can represent the global network structure of a technical system,
the links between different technical systems and the dependencies between individual functional
locations. Another one is Bill of Materials. We have three kinds of maintenance related bill of materials
such as material BOM, functional location BOM, equipment BOM. Task lists are used in both the routine
and non-routine processes to ensure operation standardization. Maintenance Planning is the process of
defining Routine Maintenance strategies and using these to create a set of predefined maintenance
tasks, which are scheduled, to be completed at regular intervals.
18
Interview Transcript #4: Mr. Oswal, AGM, C&IT, Bhilai Steel Plant, SAIL
1. Which type of IT strategies you are currently implementing?
Currently, we are concentrating on those IT strategies, which enable us to optimize our business
processes, help us adopt the best practices and above all, allow us to have an integrated and unified
view of the organization based on a common information backbone. The applications, which add
significant value to the organization, help make it lean and efficient and above all competitive in the
marketplace get preference in their investment portfolio.
2. Have you implemented MES?
We under collaboration with POSDATA Steel has successfully implemented Manufacturing Execution
System (MES). It is an Industrial IT tool for improvisation in Production Scheduling and Optimization of
manufacturing operations. MES is an interdependent architecture from any H/W and DBMS vendor.
3. Can you explain the POSDATA in details? Its applications?
POSDATA covers the entire scope of production management from order confirmation to dispatch. This
includes - Order receiving, quality control, process management and production control. The Operation
management is used for steel-making process, casting, cooling and heating. The Coil Yard Management
module is used for Work in Progress and Finished goods yard and CLTS management (Crane local
tracking system). MES helped us achieve responsiveness to customers demands by connecting the
Shop floor production to Management Business Information. It helped integrating the manufacturing
operations of Steel Melting Shop -2 (Consisting LD Converters & Slab / Bloom Continuous casters), Plate
Mill and Rail & Structural Mill.
Interview Transcript #5: Mr. Srijan Chowdhury, Manager, IT, Tata Steel
1. What are the advantages of SAP implementation in Tata Steel? Is there any shortcomings
of the same?
SAP ERP has helped us in integrating business processes and practices across the organization. It has
also helped achieve a robust level of optimization. An example is the practice of order balancing to plan
the daily production volume. Implementation of SAP ERP in human resources, finance, sales,
procurement and other support functions has been high. But, it lags behind when it comes to
the core operations where many bottlenecks, such as that of data acquisition, exist. These
shortcomings are faced mainly on the shop floor and hinder smooth implementation of SAP.
2. Tell us something about MES? Is Tata Steel planning to implement this in near future?
A one-stop solution for the problems I mentioned earlier, seems to be the implementation of
Manufacturing Execution System, which would enable better monitoring and control of manufacturing
19
operations. MES is being implemented on a pilot basis in our Kalinganagar plant. The state-of-the-art
plant is going to be commissioned soon, and a high level of automation is the objective.
3. Will it be cost effective to implement MES?
There has always been a debate over the costs and benefits of implementation of any new technology
in Tata Steel, be it SAP or something as simple as a new reporting tool. The same is true for MES too,
especially when someone takes into account the large scale on which MES needs to be implemented.
4. Any plan to implement the same in the Jamshedpur plant?
The level of success of implementation in the Kalinganagar plant will determine whether we would go
ahead with the same in the bigger Jamshedpur plant, where the challenge is even tougher, owing to the
fact that the plant was commissioned over a 100 years ago - in 1907. Though most of the units have
been replaced with advanced ones since then, achieving a system in which all units talk with each
other is still an expensive and complicated affair. Nevertheless, it is clear that MES is the next step
towards futures plants - what is the right time to move towards MES is the question being debated on
today.
5. Does MES implementation will really add value to the steel sector?
Though, domestic companies are still drifting towards the incorporation of MES, the global steel and
iron industry players are a step ahead with virtually all leading Chinese iron and steel industry players
having their own customized MES in place. Also, ThyssenKrupp CSA, an integrated steel plant in the
Brazilian state of Rio de Janeiro, implemented a manufacturing execution system to improve cost
insight as their slap production cost was exceeding the fair market value. Thus, it can be clearly said
that MES helps in planning daily schedules in the process shops like blast furnace and steel mills which
can really help 'make money' rather than ERP which just counts money.
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