Jamshedji Tata And TATA STEEL – The Saga of Great Indian Pride

Jamsetji Nusserwanji Tata is one of the most revered industrialists, nationalist, humanist, and
the founder names in the history of Indian business. An illustrious of the Tata group, Jamsetji
Tata was a first-generation entrepreneur who established Tata Steel, the country's first
integrated steel plant.
Nothing of Jamsetji's childhood suggested he would create his own destiny. Born on 3 March
1839, in the sleepy town of Navsari in Gujarat, he was the first child and only son of
Nusserwanji Tata, the scion of a family of Parsi priests. Many generations of the Tatas had
joined priesthood, but the enterprising Nusserwanji broke the mould by becoming the first
member of the family to try his hand at business.
Raised in Navsari, Jamsetji joined his father in Mumbai, what was known as Bombay then,
at the age of 14. Nusserwanji got him enrolled at Elphinstone College, from where he passed
out in 1858 as a 'green scholar', the equivalent of today's graduate. The liberal education he
received would fuel in Jamsetji a lifelong admiration for academics and a love of reading.
Those passions would soon take a backseat to, what Jamsetji quickly understood was the true
calling of his life, business.
In 1868, at the age of 29 and wiser from the experi- ence garnered by nine years of working
with his father, Jamsetji started a trading company with a capital of $21,000. The budding
entrepreneur was by now accus- tomed to the fickleness of business life, being witness to the
failure of his father's banking enterprise. This episode blighted his first visit to England,
where he was besieged by creditors. However, Jamsetji also learned a lot on this trip, most
significantly, about the textile business.
Jamsetji's maiden expedition to England, and others that he made in subsequent years,
convinced him that there was tremendous scope for Indian companies to make a dent in the
then prevailing British dominance of the textile industry. Jamsetji started his textiles business
in 1869. He acquired a dilapidated and bankrupt oil mill in Chinchpokli in the industrial
heart of Mumbai, renamed the property as Alexandra Mill, and converted it into a cotton
mill. Two years later, Jamsetji sold the mill for a significant profit to a local
cotton merchant.
Jamsetji believed he could take on and beat the colonial masters at a game they had rigged to
their advantage. The prevailing wisdom of the time dictated that Mumbai was the place to set
up the new project, but Jamsetji's genius told him otherwise. He figured he could maximize
his chances of success if he factored three crucial points into his plans-close proximity to
cotton-growing areas, easy access to a railway junction, and plentiful supplies of water and
fuel. Nagpur, near the heart of Maharashtra's cotton country, met all these conditions. In
1874, Jamsetji had floated a fresh enterprise, the Central India Spinning, Weaving and
Manufacturing Company, with a seed capital of 15 million. Three years later, his venture
was ready to realize its destiny. On 1 January 1877, the day Queen Victoria was proclaimed
the Empress of India, the Empress Mills came into existence in Nagpur. At the age of 37,
Jamsetji had embarked on the first of his fantastic odysseys.
The period following the establishment of Empress Mills was the most significant of
Jamsetji's busy life. In hindsight, it was also the most poignant. From about 1880 to his death
in 1904, Jamsetji was consumed by the three great ideas of his life-setting up an iron and
steel company, generating hydroelectric power, and creating a world-class educational
institution (Indian Institute of Science Bangalore) that would tutor Indians in the sciences.
None of these would materialize while Jamsetji's lived, but the seeds he laid, the work he
did, and the force of will he displayed in fulfilling his dreams ensured they would find
glorious
expression.
The iron and steel idea got sparked when Jamsetji, on a trip to Manchester to check out new
machinery for his textile mill, attended a lecture by Thomas Carlyle. By the early 1880s he
had set his heart on building a steel plant that would compare with the best of its kind in the
world. This was a gigantic task. The industrial revolution that had transformed Britain and
other countries had, by and large, bypassed India. Officious government policies, the
complexities of prospecting in barely accessible areas, and sheer bad luck made matters
worse. Jamsetji found his path blocked at every other turn by what his biographer, Frank
Harris, called 'those curious impediments which dog the steps of pioneers who attempt to
modernize the East'.
The torturous twists and turns the steel project took would have defeated a lesser man, but
Jamsetji remained steadfast in his determination to see the venture come to fruition. Along
the way he had to suffer the scorn of people such as Sir Frederick Upcott, the Chief
Commissioner of the Great Indian Peninsular Railway, who promised to 'eat every pound of
steel rail (the Tatas) succeed in making'. There is no record of where Sir Frederick was when
the first ingot of steel rolled out off the plant's production line in 1912. Jamsetji had been
dead eight years by then, but his spirit, as much as the efforts of his son Dorab and cousin
R.D. Tata, made real the seemingly impossible.
The brick-and-mortar endeavours that Jamsetji planned and executed were but one part of a
grander idea. How much of a man of the future he was can be gauged from his views about
his workers and their welfare. Jamsetji offered his people shorter working hours, well-
ventilated workplaces, and provident fund and gratuity long before they became statutory in
the West. He spelled out his concept of a township for the workers at the steel plant in a
letter he wrote to Dorab Tata in 1902, five years before even a site for the enterprise had
been decided. 'Be sure to lay wide streets planted with shady trees, every other of a quick-
growing variety,' the letter stated. 'Be sure that there is plenty of space for lawns and
gardens. Reserve large areas for football, hockey and parks. Earmark areas for Hindu
temples, Mohammedan mosques and Christian churches.' It was only fair that the city born
of this sterling vision came to be called Jamshedpur.
President Abdul Kalam visited the Tata Steel plant at Jamshedpur on 13 February 2004. He
commended the company for 75 years of continuous cordial industrial relations. The last
reported strike at the steel plant dated back to 1929. Kalam had wholesome praise for the
many welfare schemes introduced by the company, many of which were of a pioneering
nature even on the global scale, such as the eight-hour shift or the provision of housing to
employees. The elegantly designed and well-laid out museum at Jamshedpur is replete with
many such 'firsts'.
In the earlier model of steel-making, the raw material was shipped to where the primary
steel- making capacities existed, which were inevitably near the markets the steel was sold
in. In the pre- globalization era, when leading steel makers set up shop, the concept of
owning assets in other countries was unthinkable because of closed national boundaries. In
addition to this, high tariff barriers made it prohibitively expensive to move goods between
countries. Therefore, steel was made in the country it was sold in, regardless of whether the
raw material was available in that country. In fact, this is one of the reasons some of the
largest steel companies in the world have a limited international footprint. Tata Steel was no
exception to this rule and could embark upon its international presence only in mid 2000.
Globalization and the World Trade Organization's pressure to lower tariff barriers have been
gradually changing these factors. This has been forcing the century-old industry to change
the way it churns out steel. Another reason to look at things in a different light has been
soaring freight costs. A shortfall in global shipping capacity, fuelled by China's insatiable
demand, has raised freight costs by 344 per cent since 2002. Shaken, the largest steel
companies have started questioning the wisdom of transporting bulky raw materials such as
ore and coal across continents. It is much more sensible to make primary steel closer to the
raw materials and then ship the semi-finished steel, which is far less bulky, near the final
markets for finishing.
The other reason for this global shift in manu- facturing philosophy is that long-term links
with raw material suppliers are becoming critical. There is a shortage of iron ore and coking
coal in the world. The mining industry did not foresee China's appetite for more than 250 mt
of steel a year. Therefore, it will take some time for the new mining capacities to kick in.
Tata Steel's rare advantage is that it has captive iron ore mines with capacities far in excess
of its current needs. Therefore, it makes imminent sense to expand its primary steel-making
facilities in India and look for finishing capabilities elsewhere. The capacity at Jamshedpur is
being expanded to 7.4 mt from the current 5 mt and a new plant of 6 mt will be ready in
Orissa by 2008.
As a part of this strategy, on 16 August 2004, Tata Steel acquired the steel business of
Singapore- headquartered NatSteel in a 13.03 billion (US $289.5 million), all-cash
transaction. At 13.03 billion NatSteel is a relatively inexpensive acquisition. Compare this
with the 100 billion the company is spending in Jamshedpur and the 80 billion in Orissa. It
takes about 32 billion to set up a one mt green-field steel plant. Therefore, it was a smart
acquisition on part of Tata Steel. The challenge for Tata Steel is to bring down the high cost
of production at NatSteel. One way is to supply NatSteel with billets (semi-finished steel)
from India. Orissa and Jharkhand are dotted with small rolling mills that have been lying idle
due to shortage of coal and iron ore. Tata Steel will supply these mills with both these
resources and buy billets from them. If NatSteel's electric arc furnaces are shut and scrap is
substituted by billets, then its cost of production will come down by about US$100 a tonne.
Tata Steel has always been innovative in its production planning. During 1986, work began
on a mixed integer linear programming (MILP) model that would optimally allocate scarce
resources so as to maximize profits. This emphasis on optimal profits represented a
significant change in thinking. maximizing tonnage without paying too much Up to that time
the spotlight had always been on attention to that policy's overall impact on profit. It was
wrongly assumed that tonnage and profit were
almost equivalent.
Tata Steel is a fully integrated iron and steel-making plant that consumes vast amounts of
energy. An early focus of the modelling effort was the impact of scarce power resources on
production planning. In metropolitan areas, power availability for Tata Steel fluctuated by
time of day and season and, in some instances, the reduction of power was abrupt. One
critical set of decisions involved determining which production activities to shut down as
power resources declined. Before the model had been implemented, the policy was to shut
down finishing mills first and later primary mills as power became scarcer. The model
demonstrated that the optimal strategy was really to shut only a few of the finishing mills
before starting to turn off the primary mills. The decisions as to which mills to turn off were
represented in the model as 0-1 variables. The first major success of the model occurred in
November 1986. The model enabled Tata Steel to generate more profits than the month
before even though there was less available power and total production was down. It is
estimated that in the first year of implementation, the MILP model increased Tata Steel's
profits by US $73 million as it shifted the company's focus to maximizing profit rather than
tonnage. The model has since been applied to other parts of the company and its affiliates

that produce tubes, tinplate, and steel wire rope (Sinha et al. 1995). Figure 11.11 shows the
projected production plan of Tata Steel for the financial year (FY) 2005 in relation to the
actual production of hot metal, crude steel, and saleable steel during FY 2003 ad FY 2004.

Fig. 11.13 shows the projected sales plan for FY 2005 in relation to FY 2003 and FY 2004.
Various varieties of steel such as hot rolled (HR), cold rolled (CR), galvanized steel (Galv),
longs, and semis are considered. Theoretically, the only difference between hot rolled and
cold rolled steel is that hot rolled steel is rolled to its final dimensions while hot enough to
scale (over 1700 degrees F) while cold rolled steel is rolled to its final dimensions well
below scaling temperatures. The finished tolerances on hot rolled steels are looser than on
cold rolled. Not only the plus or minus tolerance from nominal size, but the 'squareness' of
the product. One other difference is that if you buy cold rolled steel, you can be pretty sure
that it has close to 0.18 per cent carbon content and few other impurities. However, the
specifications for hot rolled steel can let the carbon content go as high as 0.29 per cent and it
can contain many more impurities. More carbon makes it harder to forge. Generally, a
customer has to pay about twice for cold rolled steel as for hot rolled steel, for reasons which
are probably obvious from above.
Galvanized steel goes through a chemical process to keep it from corroding. The steel gets
coated in layers of zinc since it is resistant to rust. For countless outdoor, marine, or
industrial applications, galvanized steel is an essential fabrication component.
Flat steel products are largely used as inputs to make the category of steel products called
cold rolled prod- ucts, which are used for making consumer durables and automobiles. The
long steel category consists of prod- ucts for the construction and infrastructure industry.
Semis refer to semi-finished steel, which may be in the form of blooms, billets, or slabs. It
requires finishing to be given before finally being used in
various applications.Figure 11.14 shows the actual daily production of Tata Steel during
April and August 2005 and Fig. 11.15 displays the results of maximizing hot metal ratio at
Tata Steel during the last few years. Figure 11.16 shows the crude steel production and
manpower productivity at Tata Steel with projections for the
year 2006.
January 2007 saw Tata Steel acquiring the London- based Corus, one of the world's largest
producers of steel and aluminium. Corus was formed in 1999 following the merger of Dutch
group Koninklijke Hoogovens N.V. with the UK's British Steel Plc on 6 October 1999. It
employs 47,300 people worldwide and 24,000 people in the UK.
This acquisition has made Tata Steel fifth biggest producer in the world (the world's biggest
producer being Mittal-Arcelor).

Most legacy setups at companies exist because either ongoing projects require older
software/hardware, a rollout is too difficult to do all at once, or key decision makers just
don’t like change. But as technology becomes more advanced, many businesses find
themselves dealing with the problems caused by an existing legacy system. Rather than
offering businesses the latest capabilities and services, like cloud computing and
superior data integration, a legacy system keeps an enterprise in a business rut. Let’s explore
what legacy systems are and how you can effectively achieve data integration with legacy
systems.

What are Legacy Systems?

A legacy system is an obsolete computing software and/or hardware that is still being used.
The system still fulfills the requirements it was originally intended for, however, it doesn’t
allow for expansion.
Challenges with Legacy System Integration
Here are the key challenges associated with legacy system integration:
 Costly maintenance
The cost of maintaining a legacy system is high but mostly futile. While regular maintenance
can keep it running, there’s no or little chance for business growth with the legacy system.
At some point, there won’t be any more support or updates for a legacy system. If the system
fails, you won’t have anywhere to turn. 
 Data stuck in silos
Many legacy systems are built on frameworks that can’t directly integrate with newer
systems. Consequently, every legacy system is its own data silo.
 Isolated departments
Departments that use legacy systems are often left out of data integration occurring in the
rest of the company. If one team maintains a legacy system while the rest of the organization
upgrades, that one team is isolated from business intelligence and insights being created in
integrated systems.
 Tougher compliance
Organizations today must abide by strict compliance regulations. As these regulations
continue evolving, a legacy system may not be equipped to fulfill them. For
example, GDPR requires companies with customer data to maintain well-governed records,
which is quite difficult in outdated, siloed systems.
 Weaker security
Legacy systems are more vulnerable to hackers than newer systems. They have outdated data
security measures, such as hard-coded passwords. 
Connectors for Legacy Systems
Legacy systems are the mainstay of many applications, which is why legacy system
connectivity is becoming increasingly critical within the enterprise. For instance, the average
age of a state government’s tax system is 24 years old. As time goes on, such old systems,
which are built on obsolete technologies like Cobol, IBM DB2, Netezza, Sybase, etc., must
continue to co-exist with more modern systems within the IT ecosystem.
A modern ETL software is equipped with connectors to better surface data from your legacy
system by integrating it with modern systems and, in turn, get more out of your legacy stack.
For example, there are connectors with ETL software that offer the capability to read
COBOL copybook and IBM DB2 BU files. As a result, they help organizations integrate
mainframe data with big data for data warehousing and analytical purposes.

Discussion Questions
1. How does the projected production plan for the financial year 2005 in Fig. 11.12 relate to
the actual daily production at Tata Steel during April to August 2005 (Fig. 11.14)? Do you
think the actual vie production is in line with the projection?

2. What kind of aggregate production planning method is suitable for Tata Steel in view of
the fact that the demand for steel in the coming few years in India as well as rest of the
world would be much more than the supply?

3. In Fig. 11.13 what is the reason for increase in sales projections for all other types of steel
at the expense of hot-rolled and semis?

4. Labour productivity at Tata Steel (Fig. 11.16) is constantly rising. What reasons can be
attributed to this rise?

5. Struggling to overcome the management and cost demands of a legacy data system