From Mining to Markets

“As one of the world’s largest aluminium producers, Hindalco aspires to excel in the effective management of resources while minimizing our ecological footprint through improved supply chain operations,” Sukanta Das, Chief Logistics Officer, Hindalco Ltd., during an interview… 

How does the Hindalco aluminium value chain work?

Hindalco runs fully integrated aluminium operations in India, from mining to aluminium semi-fabricated products. Apart from aluminium ingots, sheets, wire rods and billets, we also make aluminium foil for food and pharma packaging, and branded roof and window solutions. Hindalco produces 1.3 million tons of aluminium per annum. Our operations are spread across the country based on where our key inputs and markets are located. The key inputs for aluminium production are bauxite and power. We operate bauxite mines and coal-based captive power plants that supply our aluminium smelters. One ton of aluminium will need about 6 tons of bauxite and roughly 12 tons of coal (for power generation). Most of the bauxite is sourced from our captive mines, the rest from outside suppliers. Coal is sourced mostly from Coal India and some from our own mines. So that is the scope of our supply chain footprint.

As a thumb rule, producing and selling one ton of aluminium calls for transporting 22 tons of material, including solid wastes generated in the process. At Hindalco, we use a variety of transportation solutions such as long-distance conveyors (LDC), ropeways, road, rail and coastal. Since our markets are both domestic and international, we use multi-modal transportation to reach to our customers.

The coronavirus outbreak has hugely affected global supply chains. We face the challenge of keeping human lives safe and protected while trying to secure our economic lifelines. At Hindalco, we always have a business continuity plan in place. We were ready for the challenge, otherwise it would have been a huge problem. There is no room for errors when you are dealing with continuous process plants like an aluminium smelter. 

How do you manage the daunting task?

I believe any logistics operation, irrespective of the industry or sector, requires agility and flexibility. To handle challenges and market pressures, you need to have a robust monitoring mechanism and stay ahead of the curve. The complexities in our operations arise in terms of handling different types of products, modes of transportation and large volumes. We have plants situated in remote locations to be close to the mines. In such locations, major movement is through rail. Most of our plants have their own railway sidings. We have laid about 10-12 km of track to connect plants with the main line and we have our own fleet of rakes, BTAP rakes for Alumina and a BTCS rake for Caustic soda.

There is always an element of uncertainty and delay when it comes to moving goods through rail. We have deployed our own traffic managers across railway divisions to ensure smooth movement and rigorous monitoring during transit. These traffic managers co-ordinate with railway divisions where our rakes are in operation so as to get real-time information.

Our other major product Copper is a valuable commodity. Copper is transported in convoys, and we deploy pilot cars that travel with the consignment. The point I am making is that there is no ‘One Size Fits All’ scenario. In many of our operations, we are setting supply chain benchmarks. We have segregated the supply chain into streamlined subsets to deal quickly even with unforeseen complexities. In continuous process industries, we need to always have a Plan B ready, while keeping a firm eye on what’s happening on the ground and staying in touch with our people to manage any eventualities. 

Please enlighten us about your endeavors towards streamlining supply management globally.

As one of the world’s largest aluminium producers, Hindalco aspires to excel in the effective management of resources while minimizing our ecological footprint through improved supply chain operations. To give you a sense of the numbers, till last year, we were associated with more than 11,220 suppliers in the Aluminium Business and about 2,450 in the Copper Business. Most of our suppliers are based in India, the rest are spread across China, Japan, Togo, Indonesia and South Africa. Currently 34% of our suppliers have ISO 14001 certification. We intend to increase this number by 5% to 10% by next year.

We have a screening process for all suppliers. There is due diligence to look at the commercial feasibility of collaboration and to evaluate suppliers on parameters such as price competitiveness, quality, response time, Environmental, Social and Governance (ESG) criteria such as health and safety, environmental standards, working conditions, labor rights, and so on. The ESG parameters constitute a weightage of a minimum of 25% in our supplier evaluation process. Based on the score received, suppliers are categorized as Identified Vendors (those willing to work with us), Empanelled Vendors (those eligible for trial orders) and Approved Vendors (those who are approved after evaluation).

Our sustainability framework involves future proofing by creating value for all our stakeholders. Suppliers are a key part of our ecosystem and we lay great emphasis on sustainable supply chain management. This has been a priority in our materiality matrix and our customers also understand this. We have framed our Supply Chain and Procurement Policy such that our suppliers can align themselves with us on sustainability aspects such as resource conservation, use of alternative materials and renewable energy, water stewardship, safety, health, adherence to human rights across the supply chain. In short, we are creating an environment that supports our supply chain partners in their sustainability journey.

How are you planning to drive efficiency through technology?

At Hindalco, we have been adopting best-in-class digital technologies to achieve higher visibility, speed and efficiency across our processes. We are leveraging analytics for data-driven process management. For instance, we have GPS-based logistics solutions for finished goods. This entails tracking truck movements starting from the refineries to smelters to downstream plants to warehouses and customers. This technology has provided greater visibility on finished goods to both internal and external customers. Other benefits include better operational control, faster damage control in case of accidents and optimal route usages. We have also deployed Blockchain for smart contracts at the foils plant. Workers, suppliers and Hindalco are connected on a single, transparent and incorruptible digital ledger of economic transactions, which records financial transactions and other important developments through a smart contract. This helps users to identify and mitigate inefficiencies across the value chain.

Share with us your green trailer strategy.

Hindalco's aluminium trailers and bulkers are the greener, stronger and smarter alternative to conventional transportation. The idea began as a small discussion to explore the benefits of aluminium in the transportation and logistics industry. Within ten months, the green trailer became a big step towards revolutionizing the transport industry.

The Hindalco trailer is made from high strength aluminium alloy. This means that a 34-foot long aluminium trailer is actually 50% lighter and weighs 2.5 tons less than an equivalent-sized steel trailer. The lighter weight makes it highly fuel-efficient with each trailer saving up to 15,000 litres of fuel. Each trailer can potentially carry a corresponding extra

load of 2.5 tons per trip, thus providing additional revenue and other business benefits to the operator. It can ferry a wide range of materials such as cement, alumina, fly ash, grains, flour, and even heavier material such as steel coils and cylinders.

The reduction in total weight also makes it environment-friendly as it gives off 25 tons less GHGs and helps in achieving BS-VI emission targets. Plus, aluminium is entirely recyclable, which means the trailer can be recycled over and over again. It has a 70% higher scrap value, which makes it more cost-advantageous over its lifecycle. It’s the unbeatable combination of improved vehicle efficiency and reduction of carbon footprint that makes the aluminium trailer a smart, truly sustainable product.

How did this idea strike you?

Over the past decade, India has seen improvements in the road network and rapid growth in the logistics and freight industry. A big component of the freight industry are the trailers that ply the roads 24x7. Today, domestic trailer production is estimated to be around 20,000 units per annum. Most of these are made of steel. The heavy weight makes them slow and increases fuel consumption which leads to more greenhouse gas (GHG) emissions, and therefore a higher carbon footprint. The domestic trailer market is expected to grow at 10-12% annually. All of this meant there was an urgent need to design a sustainable alternative to traditional commercial vehicles.

We first started exploring the idea of an indigenously built aluminium bulker. Like the trailer, the aluminium bulker is lighter in weight and enjoys a longer life with a low cost of maintenance. For instance, a 30 cubic meter bulker is two tons lighter than an MS bulker of the same size. The bulker is 100% recyclable and also eco-friendly. The lighter weight puts less strain on the engine and tyres, making it more fuel-efficient, adding to the eco-friendly properties of the bulker. Plus, it is corrosion resistant which increases its longevity and reduces maintenance costs.

While the aluminium bulker costs twice as much as a traditional bulker, it is able to earn this back quickly because it can transport an extra 2 tons of material in every trip. This translates into extra earnings which are almost three times the investment. By developing the aluminium bulker, Hindalco showed that the transport fleet operators could enjoy the same benefits of aluminium usage that high-end passenger vehicles have enjoyed for years.

What were the challenges that came your way?

The green bulker and trailer initiative started with Hindalco exploring ways to increase India’s per capita consumption of aluminium. When we looked at transport solutions, we met a lot of roadblocks. A big challenge was the low-risk appetite of auto OEMs. To get beyond this, Hindalco decided to fast-track product development by working with unorganized players in the commercial vehicle segment. But this was easier said than done as we had no expertise in developing transport solutions.

The first challenge was to identify a fabricator. The company needed someone willing to work with aluminium fabrication, as it requires a different kind of expertise. Hindalco spoke to several fabricators and then shortlisted a few who were willing to take the big leap.

We partnered with UltraTech Cement, another Aditya Birla Group company, who helped these fabricators get firm orders from transporters and logistics companies. Since these were first-of-their-kind products, the idea was to get users on board for testing and checking the commercial viability. Hindalco worked behind-the-scenes to ensure that the fabricators had no problems with product development and supply of aluminium. We were hand-holding whenever required. To make the development process easier, Hindalco created a kit of various aluminium components and delivered it to the fabricator in the requisite shapes and sizes.

The contribution of these fabricators cannot be overemphasized. They were new to aluminium welding and did not have the infrastructure for it. Hindalco introduced these fabricators to processes such as inert gas welding and plasma /laser cutting – prerequisites to working with aluminium. We arranged for the first aluminium welding machine to be imported and also the training of the fabricator’s teams. Handling aluminium alloy is not easy. Improper handling leads to scratches and dents. The fabricators were trained on how to work with aluminium to preserve its metallic lustre. An entire ecosystem comprising fabricators, welding expertise, vendors for aluminium joineries (nuts/bolts) and service support was created so that buyers would have no concerns around timely repairs and availability of spares.

It was a long hard grind, but all the effort has now started showing results. We are seeing a continuous rise in orders and enquiries. In less than a year, over ten bulkers and four trailers have been sold. Now we are looking at recreating this ecosystem across India.

It’s an exciting initiative. The indigenously developed aluminium trailer and the bulker are a testament to Hindalco’s commitment to introduce sustainable, engineered transport solutions. More importantly, these products exemplify Hindalco’s purpose of making products that are greener, stronger and smarter.

Your stint in supply chain as you have been a part of various challenging sectors…

Challenges excite me and keep me going. If there is nothing new to learn in my job, then it doesn’t help me grow or give back to the organization. In logistics, every product and industry comes with inherent challenges and nuances. One needs to understand what’s required for that product to be moved in a seamless manner.

Before joining Hindalco, I had never worked in a manufacturing organization, so there was a lot of learning and evolving here. I had a 3-month induction period to understand the manufacturing process, which helped me immensely in devising a product-driven supply chain. I experienced a similar learning journey years ago when I saw the logistics dynamics relating to retail and e-commerce boom from close quarters. So at every juncture, you experience newer paradigms in order to evolve as a professional and that’s how it should be.

Your most challenging project at Hindalco…

I think a logistician’s core KRA has always been to work at a war footing. Nothing can illustrate this statement better than the current scenario of a nation-wide lockdown. The work doesn’t stop and we have to manage the entire supply chain while working from home. As a continuous process industry, our refineries and smelters need to run even during the lockdown. We have to ensure that all input materials reach the plants and finished goods are evacuated for exports. It is heartening that even in this volatile period, we have managed to ensure seamless production and higher export sales.

And yet, every day has been challenging – there were times when we couldn’t move anything. There was confusion on the ground as there were multiple directives from the central and state governments. In such a situation, we had to quickly find alternative solutions to overcome unexpected obstacles. We made maximum use of railways because inter-state movement on roads is very limited. We had to go that extra mile and get things under control in the shortest time possible by liaising with government officials and local administrations. One must remember that tough times call for tough measures and we need to be ready for it.

Going forward, how do you see India’s supply chain evolving?

Digitalization is going to be the big game changer. It will make the entire supply chain more visible, flexible and agile. Organizations will need to understand the extent of digitalization they need in order to harness optimal benefits. Adoption and adaption are both critical and that’s where companies will face the greatest headwinds.