Case Study

SAIL saves on traveling costs through VC

SAIL has significantly reduced its annual travel and communication costs by deploying a Polycom video conferencing solution. By Akhtar Pasha

When Steel Authority of India Limited’s (SAIL) travel and communication costs started putting pressure on its bottom line, it turned to video conferencing and earned an immediate return on investment (RoI).

SAIL is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets. Most of its operations, particularly manufacturing plants, are located at remote locations. SAIL has five integrated steel plants at Bokaro, Rourkela, Bhilai, Durgapur and the IISCO plant. It has three special steel plants—Alloy Steel, Salem Steel and Visvesvaraya Iron & Steel and marketing offices.

The root cause of high annual expenditure was the fact that its operations and manufacturing plants were located in remote locations. MDs and Directors used to travel extensively to Delhi from their respective manufacturing plants for meetings with the Chairman and the Ministry of Steel (MOS) for taking administrative and business critical decisions pertaining to sales & marketing, production, stocks, inputs as well as prices of steel and coal. Deomurti Thakur, DGM (C&IT), SAIL, said, “The travel, stay and accommodation used to cost anything between Rs 30,000 to Rs 35,000 per person per meeting amounting to over Rs 200 crores of annual expenditure for all in-person meetings in 2003.” He continued, “The benefits of using Polycom video conferencing solution were so strong that we recovered the full deployment costs in less than a year. Additionally there has been a 10% YoY drop in our annual traveling costs subsequently.”

High traveling costs

According to Thakur, “We give priority to our large customers and any discussion with them on quality, quantity, production, delivery & dispatch required our Directors and MDs to conduct personal meetings to satisfy the customer. Even regular meetings with our Chairman required the Director and MDs to make personal visits.” For each executive personal meeting we had to book their premium flight tickets, put them in a star hotel and look after other traveling expenses. Additionally it used to take a couple of days to implement the decisions taken during the meeting with Chairman. The time management was poor.”

Thakur added, “We needed to improve communication for dispersed and remote employees [MDs and Directors], reduce travel costs and time spent on the same by employees, improve remote communications with external suppliers and customers and reduce corporate travel expenditure, avoid personal meetings and regulate time management without compromising on customer service and deliverables.

SAIL faced several issues. For example, if there was a corporate decision to trim production, a series of plans and decisions were required in consultation with other manufacturing plants with the Chairman such as why did SAIL need to trim production, by how much should the raw material intake be reduced, how to plan the new production load and so on. This exercise required many personal visits to the corporate office for personal meetings with senior executives.

Similarly there were lots of market related decisions that SAIL used to take after a joint meeting with all the MDs such as fluctuations in raw material prices to arrive at the selling price of the finished goods. The price of coal, which is used for manufacturing steel, was volatile and this had its effect on production.

Thakur added, “Additionally all cost cutting decisions required personal meetings between all the MDs and the Chairman and it also involved investors, customers, suppliers and global vendors.”

Decision to reduce travel cost

The management at SAIL took a decision to reduce travel expenditure for faster decision making and reduce travel costs in 2004 and decided to go in for a Video Conferencing (VC) system. After meticulous planning, SAIL came up with a specification for connecting its 15 remote locations through VC and floated a tender in 2005. A few things that were considered before investing in VC were—how many people and how many locations would be connected? Would the conference be held in large auditorium, small conference rooms, or personal workspaces?

The answers to these questions determine the type of the equipment that SAIL would need.

The company evaluated Tandberg and Polycom video conferencing solutions and finalized on the latter as its bid was the lowest [L1] at Rs 1.5 crores. After a successful rollout at the first 15 locations, SAIL extended the VC rollout to another 15 locations. The total cost for deployment at 30 locations was Rs 3 crores.

Thakur said, “We are using a Polycom VSX 7000 camera with codex and MGC Bridge at each location. It combines top-quality audio and video in a single set-top system that’s easy to use, easy to manage, and completely within your reach. It comes with IP, ISDN and Serial/V.35 network interface options.”

When SAIL started with video conferencing, IP wasn’t the standard, but it didn’t have the choice of using ISDN as the infrastructure simply did not exist at the remote locations where the organization had its plants. Therefore, for remote locations it is on IP and it has three ISDN lines.

Each location has a committed bandwidth of 1 Mbps, which connects to the Main Controller Unit (MCU). The ISDN lines have a total capacity of 348 Kbps bandwidth, which is used for connecting to overseas customers and investors. Thakur said, “Sony terminals [screens] with Polycom VSX 7000 offer near CD quality audio thanks to the Polycom VSX Siren 14Plus audio with an integrated midrange speaker and subwoofer, paired with a 360-degree microphone. This gives us the feeling that we are talking to the other person sitting right next to each other even though we may be seated miles away. The audio clarity is very good with no latency issues. The 2 millisecond video latency is almost negligible.”

The tangibles

SAIL recovered the full cost of the deployment within the first year itself. Thakur added, “The RoI on the Polycom VSX 7000 was fairly quick and the response from the MOS to the Chairman and the Directors was tremendous. Virtual meetings through VC between the Directors and MDs and the Chairman have significantly brought down travel expenses and cut the traveling time for administrative and strategic meetings.”

He added, “Today business decisions—be they market-related, production, new initiatives etc—are taken at the speed of lightning. Since all the MDs are together in one virtual conference room, the rollouts of decisions are much quicker.” For example, recently when SAIL announced a national award [internal], the Chairman wanted to select a new design for trophies before placing the order. He called for a virtual meeting through VC with all the MDs and showed them three designs and one was approved on the spot and the order was placed immediately.

According to Thakur, the annual traveling expenses, which were growing earlier, have stopped as VC has helped SAIL to reduce annual travel costs by 10% in every year after the implementation. “By using video conferences, we can use our travel budget more efficiently and reduce travel time for greater productivity.”

The intangibles

Among other benefits, SAIL sales team uses VC for walkthroughs and new RFPs to customers. This allows multiple departments to brainstorm and get started on the different sections of the RFP in a fully-integrated and coordinated manner.

VC allows the manufacturer to see work in progress around on a day-to-day basis. In the past, seeing the far-flung production facilities required traveling. That has completely stopped.

What’s next

SAIL’s next immediate technology spending would be on High Definition (HD) video conferencing. The company is contemplating replacing its Sony monitors with HD systems at 15-20 locations. Thakur said, “Some of the centers and departments are demanding for HD conferencing system for quality purposes. We are working on the costing part and studying the options that are present in the market. Once we have the specification ready, we will proceed with a tender, which will happen soon.”

akhtar.pasha@expressindia.com