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E-procurement: MetalJunction.com Helps Tata Steel Save Rs 5.37 Crore

Arindam Sinha, Jamshedpur

MetalJunction.com Pvt Ltd has brought "considerable benefits" to Tata Steel during the first full year of its operations. Floated jointly by Tata Steel and Steel Authority of India (SAIL), MetalJunction.com has two units, CommerceJunction, which handles e-procurement issues and MetalJunction, which focuses on e-sales and fulfillment services.

On the e-procurement front, Tata Steel sources said the company has procured materials worth Rs 90.25 crore up to March 31, 2003 through this route.

Company sources claimed that the procurement method resulted in savings of Rs 5.37 crore (around six per cent). Savings were calculated by the company as a reduction achieved in online price over the immediately preceding offline procurement price. They said savings had been as high as 23.43 per cent in some cases while admitting that in some other instances "there have been marginal or no savings at all".

On the other hand, CommerceJunction brought in more competition and "ensured that prices were either reduced or arrested".

Another gain which the company recorded by outsourcing the procurement of certain products/services to CommerceJunction and by migrating the process online has been its saving on man-hours and on the procurement-cycle time, said sources. Its conventional procurement processes involve considerable time and man-hours.

The steel major is now identifying more "spend areas which can swiftly be moved to online procurement".

Similarly by adopting e-selling, which the company had initiated in February 2002, it sold around 2,21,259 metric tonnes of steel worth Rs 291 crore. While online selling "has been reflective of the market situation", the company had saved on "the entire cycle-time of selling", they said.

MetalJunction also proved to be a boon to buyers by ensuring the convenience of making payments online, through a cash management service arranged in association with Citibank and HDFC, they said.

MetalJunction, in association with some leading private and foreign banks, has been providing credit facilities to Tata Steel's distributors by way of what is called "channel finance".

Company sources said this has "ensured that Tata Steel need not offer credit on sales", while ensuring increase in realisations and lowering its working capital requirements.

The online initiative had seen about Rs 262 crore finance being arranged till March 31, 2003 for around 58 of its distributors, they said.

According to Tata Steel sources, the success of "channel finance" has convinced it to extend the online finance facility to original equipment manufacturers (OEMs) as well during the current fiscal. A payment gateway is also being enabled to facilitate online payment in case of online auctions and tenders.

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