PAPER PRESENTATION ON

DEVELOPING SUPPLY CHAIN

MANAGEMENT STRATERGY FOR INDIAN
FOUNDRY SECTOR

PRESENTED BY: PAWAR VIJAY D.

T.E. PRODUCTION

SUR SUKDEB N.
T.E. PRODUCTION

-GUIDEProf. R.A. KAPAGATE.

AMRUTVAHINI COLLEGE OF ENGINEERING

AMRUTNAGAR, SANGAMNER, 422608

ABSTRACT
The paper details with analysis of existing scenario of Indian foundry
sector and further discusses the issues related to the framework of SCM
strategy. The analysis is focused on the major strength of the sector that
include possibility on indigenous domestic supply of raw materials,
availability of well trained human resource, and huge export potential; and
the notable weaknesses such as high rate of units, confusing mindset on
environmental and technological investment issues, poor manufacturing and
supply chain performance.
The study suggests that prime focus of the prime sector must be on
configuration and adoption of world class SCM practices in quickest
possible timeframe. This includes relationship management with key
suppliers, customers and service providers. It highlights to create awareness
among the foundrymen on market potentials abroad, product range required
and quality standards sought and effective logistics. Paper recommends that
Indian foundry association should take initiative and plan for databank
creation and corresponding knowledge transfer to members.

1. INTRODUCTION:Modern foundry was established in India when the Barakar works at

its Kulti plant manufactured pig iron in1875.The Bengal steel & Iron
Company was incorporated in 1891. Subsequently iron ore was produced in
Bihar & TISCO was established in 1912. Later the industry has grown
further grown further in the public sector during the first four has decades of
planned development. However since 1991 its growth has been observed
mostly in the private sector.
Today the Indian Foundry industry is playing a very core and vital
role, in a way it can be termed a mother industry as most of the industrial
sectors like automobiles to steel heavily depend upon foundry products for
their survival. To that extend it occupies a special place in shaping the
countrys economy also.
If we see industrial statistics, India is currently among the 10 largest
(in fact, the report say it is the sixth largest in the world, after USA, Chain,
Japan, Russia &Germany) producers of ferrous and nonferrous casting and
has over 6500 foundry in small-scale sectors; but approximately 90%of
these fall in the small-scale sectors. Secondary, in terms of units & number
of people employed, India is the second largest player in the foundry
industry after China. The total output of the Indian foundry sector us
estimated to be worth US$2.08 billion (i.e. approx. Rs. 100000 cores) with
estimated output of approximately 3 million tones consisting of 2.36 million
tones of gray iron castings, 400000 tones of steel casting, 268000 tones of
malleable and SG Iron casting and 20000 tones of non-ferrous casting. On
the other side, the annual report reaches above Rs. 700 cores worth of
casting to countries like USA, U.K., Canada Germany etc. catering to the
needs of a wide range of industries. This export shares the global market
place in about 4% and thus found to be one of the most important sources of
the foreign exchange to the country.

The above figures are in million tons.

- Ranking on the basis of production of castings

Countries
USA
CHINA
JAPAN
RUSSIA
GERMANY
INDIA

Rank
1st
2nd
3rd
4th
5th
6th

1.1Ground Level Realities

If we analyze the strength and weaknesses of the industry we could see the
following facts:
a. The industry is typically described with 3D image of a Dirty, Dull
and Dangerous sector.
b. During last few years, orders from Government departments like
Railways, DGSD, and Post & Telegraph have reduced
considerably. Railways are replaced by PVC, cement and asbestos
products. This has results in the overall reduction in demand as
well as the fear of future obsolesces.
c. Many foundries in small-scale sector have closed down while
some are struggling to survive. It is reported that in Howrah district
of West Bengal alone more than 100 units have closed down in
recent past.
d. Foundries in India, particularly the smaller ones, are using
obsolete technology. Lack of modernization and absence of better
technology leads to overall higher cost of production.
e. The industrys total production is just half the estimated total
capacity of six million tones per annum, resulting into lower
economy of scale as increasing the non-productive idle resources.
f. The productivity is hovering around 15-20 tones castings a person
per annum as compared to the world average of 70 tones a person
per annum.
g. International buyers are particular about recycling of sand ISO
9000 quality standards. It is reported that very few Indian
foundries follow ISO 9000 standards. Whereas, with some
exception, the eco-friendly practices are still either at design stage
or in experimentation phase.
h. Majority of the small and medium enterprises are not aware of the
implication of WTO and global markets opening up. This may
lead to his total chaos if the issues are not addressed now.

If we see on the other side of the coin, we could still hope the better times to
come:
a.
b.
c.

d.

e.

India has vast recoverable reserves of iron ore, chromites,

limestone, and dolomite etc., i.e. the raw materials constraints
could be managed within the country with planned imports.
The country has in good numbers the superior, qualified,
trained and experienced work force.
The industry, especially the steel industry, is poised for rapid
growth as is the non-ferrous industry such as aluminum, zinc
and copper. In fact, it is reported that there are about 10000
foundries in India with an annual capacity of about 4 million
tones of casting. If proper direction and missionary objectives
are extended to these units, then hopefully the products
manufactured will be of very high quality and competitively
priced across the globe.
The industrial base is getting properly shaped to produce
metal casting for international consumers. The India foundry
industry can produce castings of small as well as large sizes
to world-class specifications and quality as well as at
internationally competitive prices. This will lead to exploiting
of untapped export potential and remarkable growth of the
industry.
The medium and stand-alone units in the Indian foundry
industry are moving up the value chain slowly but positively
to produce critical quality casting, especially for the auto
industry, to survive future competition. This will lead to the
modernization of the industry and will reduce the high cost of
capital apprehension about improvement in off take.

1.2 Changing Business Environment and Global Opportunities

The world has become today more environmentally conscious and
technologies have to conform to more and more stringent environment
related norms. Hence we see that through the basics technologies in foundry
industry have not undergone much change, the emphasis has changed
remarkably. It is reported that the U.S. foundry population has declined by
about one-third over the last 20 years, largely due to the cost of legislative
compliance, especially related to environment management. This has given
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the Indian founders a good opportunity for export market. In fact, a study
conducted by EXIM bank has shown that in the last 10 years the export of
casting from India have increased seven-fold but with the pressure of cleaner
technology. Notable points is, even with these improvements the export of
casting from India amounted to only one percent of world requirement,
underlining the fact that ample scope exists in the future.
Secondary, the Indian foundry industry has option to form strategic
alliances with their counterparts in the developed countries which are on the
verge of closure, primarily due to three major reason viz. waste disposal and
highly stringent pollution control regulation, high manpower costs, and
acute shortage of trained personnel to work in foundries. This is where
Indian foundries can make their presence felt in the international market by
approaching foreign foundries to source casting form India at more
economical prices and thus enhance their market share. In order to this, India
foundries have to equip themselves with the latest technologies such as
Automation, casting simulation etc. Indian foundries cannot afford ignore
environmental implication that will also become stringent in terms of
implementation of adopt eco-friendly technologies like adopting ecofriendly melting furnace, which are fired by L.D. oil or gas and the emission
are virtually pollution free.
Left without option, the foundries need o invest in technologies
coupled with aggressive and innovative marketing efforts to the global
market place. In this view its imperative that the fragmented and
unorganized features of foundry sector must be resolved by either the
expansion of units or by local or global alliances and partnerships. Thus the
foundry industry must develop strategic plans to manage supply chain
effectively.
2.SCM strategy : Relevance & Significance
As we have discussed above, the dynamic & harsh economic
envoirment had made the customers very demanding, & hence capability
required for market entrance & market leadership has changed from ability
to supply to the ability to add more & more value to the customer. This
situation can be regarded as basic cause of evolution of Supply Chain
Management (SCM) concept from traditional material management. In fact
various functions like purchasing, stores, production, transportation, etc. are
now been seen as the integrated process chain & as the part of the
organizations overall SCM strategy.
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Supply chain is understood as bridge between Demand & Supply. It

can be defined as the process umbrella which encompasses a huge network
of facility and distribution options that perform the functions of procurement
of materials, transformation of these materials into intermediate and finished
products and then to dispatches to the concerned customers. In this context it
is interesting to note that SCM strongly proposes demand driven supply of
goods, thus supporting Lean Production Philosophy (LPP). In turn, LPP
emphasiss on the working environment of co-operation and mutual
commitment between supplier and costumer. Doz and Hamel (1998) say that
organization must work today with undefined boundaries between
collaboration and competition, with network of interdependent alliances, and
with complex value creation strategies. Porter (1985) also suggests that
forming alliance is one of the best strategies to exist and grow. Alliance
expert Lewis (1995) concluded that through supplier partnership some firms
could double their competitive resources and greatly improve their cost,
quality, cycle times, technology, costumer satisfaction etc., usually without
added expenses. In general, it is recommended that organizations should
sincerely emphasize on creating the environment of high trust and open
relations with there suppliers to manage their supply chain effectively,
efficiently and economically.

3. SCM Framework
We see today that the Indian companies in the manufacturing sector
have consolidated around their area of core competence by tying up with
foreign companies to acquired new technologies, management expertise and
access to foreign markets. The cost benefits associated with manufacturing
in India has positioned India as a preferred destination for manufacturing
and sourcing for global markets. In this context it is interesting to note that
the industry growth in future will be largely driven by the expansion of
purchasing power across the globe. In fact, to exploit global opportunities
Indian companies are reconfiguring their supply chains and striving hard for
operational excellence. Hence we find a general trend of subcontracting
visible even for the popular brands. Some amount of intranet and extranet
technologies are also seen employed to connect committed suppliers.
Frequent supplier meets and quality related discussions are not uncommon
even in the SME segment. The ultimate idea behind all these efforts is to
extract value from these investments. The agile supply chain framework
encompasses the delicate balancing of the key functional areas like dynamic
demand management, integrated collaborative planning with suppliers,
common inventory strategy, replenishment based planning, responsive
adjustment for customers, multi modal logistics etc. these issues are
addressed with operation research based optimizing models. Similarly in
the area of manufacturing & packaging, trust is given on integrated approach
to reduce the rejections, cycle time, setting time etc, & to create more value
added products. The underlining mantra of all this is relationship
management between all trading partners. This move of partnership
becomes essential to bypass slow & costly efforts to build ones capabilities
& to access new opportunities. The drivers of this partnership concept can
be summarized into three points;
1. Brutal competition across the globe is offering better quality, lower
price & less response time for the same product or service.
2. Smart & conscious consumer wants more value, reliability, after sales
service & smaller batches.
3. Limitation of isolated efforts in creative product differentiation, cost
cutting methods & productivity improvement areas.
DOZ & Hammel (1998) conclude that the global firms are using
alliance strategy to build the critical mass needed to strike out& hold the
critical mass needed to stake out and hold markets and plug skills gaps.
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Lewis (1995) concluded that forging customer-supplier relationships results

into greater financial strength, higher market share, more value and
increased operating flexibility. One of the major conclusions he made is that
the above theory will work regardless of the industry, company size or
whether focus is on goods or service.
Table 1
Overall Performance Rating of Indian
Manufacturing Sector
Scale
Supplier Involvement
Manufacturing
Planning Efficiency
Supply chain
performance
Supply Management
Transaction Issues

Mean Performance
(Range 1 to 5)
N=490
1.9
1.86

Standard
Deviation

1.35

0.11

2.82

0.21

0.18
0.16

4. Implementation Issues and Challenges

Looking at the existing style of functioning in Indian foundry
industry, we can say that enormous amount of focused efforts, are necessary
to align supply chain management practices. Altekar (2003) reported the
existing performance of Indian manufacturing sector, including foundry
sector, in the context of SCM. These results are eye opening to analysts. It is
reported that the Indian companies have not adopted SCM systematically
and to its fullest extent. In fact, the existing relationship between chain
agents are at Arms Length (Lewis, 1995), and company has not reported
any reference model to follow relationship management. They are
practically aware of partnership concepts and its benefits, but reporter doubts
on successful implementation. The phase wise Supplier/Customer
integration programme is completely unknown to most of the players.

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The results were proving the fact that organization must develop
strategic plan for the managing their supply chains. The main obstacles are
always the cultural and attitudinal problems in India. But like the
infrastructure quality and facility in India are now improving, change
management principles must be imbibed to overcome these issues. Secondly,
foundry sector must plan for long term perspective to perform differently
than the traditional style. Few of the cores areas of SCM must be attended
for immediate results. For example, out of the 70 million tones of the casting
production, around 47 million tones are consumed by the auto industry.
Indian foundry industry has good exposure to produce casting for auto
industry. This competency could be further capitalized by way of
collaborative demand planning strategy with these customers. As reporter
says the future sources for global sourcing of castings will be mainly India,
Brazil and China, Indian foundries must venture to invest in web based
advanced planning systems provided by leading SCM software solution
providers to enhance the customer service levels. This would also help in
improving the visibility of performance and offer value-added castings.
Another avenue of immediate focus is to adapt manufacturing
philosophy with the lean thinking approach. The idea is to move away from
producing large quantities of rough castings, and plan resources with single
piece flow concept. This will reduce the inventory level drastically and also
the capital blocks, and in turn, improve he financial health and working
capital management. He corresponding issues of line balancing and
economic batch scales has to be resolved by selecting less capacity and
general purpose furnaces, or by leasing the extra capacities. These will
certainly impose the world-class professionalism and transparent systems to
execute.
Regarding the logistics, especially transportation and warehousing
practice, Indian foundry industry should build relationships with third party
logistics services providers to develop additional strength. Today the global
players have found that the Indian castings are cheaper by 30% but logistics
is poor. Ideally foundry have to create warehouse facility in measure markets
abroad to counter logistics advantages of east European suppliers, and to
improve exports levels.

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Table 2
Detailed level Measurement

Scale

Mean
Performance
(Range 1 to 5)

Supplier
involvement
in
quality
improvement
Supplier
involvement
in
JIT
implementation
MPS Balancing abilities
Priority change management
Efficiency in key item planning with
suppliers
Efficiency in capacity planning
Effectiveness of SCM strategy
Supplier integration in logistics planning
and control
Level of awareness of costumer service
Supply planning sophistication
Transaction performance

2.78
1.02
1.13
2.1
1.98
2.23
0.83
2.01
1.21
2.44
3.2

5. Concluding remarks
We have seen in these papers the existing scenario of Indian foundry
sector. Major strengths include the possibility of indigenous domestic supply
of raw materials availability of well trained human resources, and huge
export potential. The notable weaknesses are highly death rate of units,
confusing mindset on environmental and technological investments issues,
poor manufacturing and supply chain performance.
The prime focus of the sector must be on configuration and adoption
of world class SCM practices in quickest possible timeframe. These include
relationship management with key suppliers, customers and service
providers. Typically, there is a need to create awareness among the
countrymen on market potential abroad, product range required and quality
13

standards sort and the efficient logistics. Ideally the Indian foundry
association { i.e. The Institute of Indian Foundarymen} should take initiative
and plan for such databank creation and corresponding knowledge transfer
to the members.

References:- Foundry November/December,2003.

- http:// www.financialexpress.com
- The economic times
- http:/www.planingcommision.nic.in
- http:// www.steelworld.com
- http:// www.google.co.in
- Supply chain management ( B.S.Sahay)

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