Struggling with declining margins amidst sluggish demand, domestic steel makers need to invest in securing raw material security to ensure long-term success, Accenture India said in a research report.
Steel firms need to sharpen capabilities in four other areas -- capital project management, becoming more customer-centric, securing human capital and building differentiated supply chains, said the IT firm, which also provides consultancy services.
Due to high input costs and a weak macro-economic environment, steel makers have started showing signs of down-cycle, leading to margin compression, the report said.
Accenture India said since raw material security is the largest differentiator among the incumbents, the capability to acquire, develop and operate overseas raw material assets has become a strategic imperative given the short-term challenges in securing such assets in India.
"Steel companies need to focus on project management as a core capability integral to its growth objectives, selecting right projects and optimising scarce resources available to ensure the projects identified are managed in a robust manner," Accenture India said.
As steel companies expand, the overlap in their respective markets and product footprint is increasing. This, coupled with slowing demand growth means they are chasing same business. In such a scenario, increased customer centricity will differentiate the high performers, said the report.
Steel firms also need to build differentiated supply- chains and adapt make-to-order and make-to-stock production strategy.
On securing human capital, the report said over the last decade, steel firms have expanded their capacity 2.5 times and are now faced with the problems of an ageing workforce on the manufacturing shop floor.
"This has forced a move towards greater automation and consequently, the need for a highly skilled workforce," it said.
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