strategic and Operational Management with Optimization at Tata Steel GOPAL P. SiNIHA Opcralioiiat Re^^earch. The Tata Iron ivid Steel Coriipaiiy Limited latiishedpur 831001, India B. S. CHANDRASEKARAN Operational Research, The Tata Iron and Steel Company Limited NlLOY MiTTER Operational Research, The Tata Iron ami Steel Company Limited GOUTAM DUTTA Department of Induslrial Engineering ami Manaf^ement Science Northwestern Unii'ersit\/, Evamtoii, Illinois 60208-3119 SUDHIR B. SINGH TOU-DI L'Uvision, The Tata Iron and Steel Company Limited ADITYA ROY CHOUDHURY Marketing Division, The Tata Iron ami Steel Company Limited P. N. ROY E.X- Principal General Manager The Tata Iron and Steel Compami Limited Tata Steel has been striving to optimize its operations amidst scarce resources and capacity imbalances. To provide decision support, we developed a mathematical model based on mixed- integer linear-programming (MILP) and hierarchical optimiza- tion between 1983 and 1986. It considers marketing constraints, capacities, yields, profitability, routes, energy, and oxygen bal- ances. Its use just for optimal distribution of power has pro- vided a benefit of US $73 million in the first year of implemen- tation (1986-1987). Tata Steel has realized other benefits, such as optimal distribution of scarce oxygen and liquid iron, optimal power cogeneration levels, break-even prices and quantities of purchased scrap, and optimal conversion of semifinished steel into finished products by other companies functioning as con- version agents. In the early '80s, the model shifted Tata Steel's emphasis from maximizing tonnage to maximizing contribution to profits. T he Tata Iron and Steel Company Ltd., million. The company employs 75,000 established in 1907 at Jamshedpur, is people and earns a profit of about $160 one of the largest companies in India. With million on an annual production volume of capital investments of about $1,700 mil- 2.4 million tons, lion, Tata Steel earns revenues of $1,100 The manufacturing facilities at Jamshed- CiipynRhl Cc 199.'), [nstitule for Operations Research INDUSTRIHS—MINING/METALS and the Management Sciences PROGRAMMING—INTEGER 0091-21CI2/95/2501/('006$OI.25 INTERFACES 25: 1 January-Eebruary 1995 (pp. 6-19)