LARSEN
& TOUBRO
Mission
1 Billion : The challenges ahead
An equipment manufacturer’s perspective
January
20, 2015, New Delhi
1
A.K. Datta, Zonal Manager
Larsen & Toubro Ltd, Mumbai
Contents
Introduction : L&T , Komatsu
Komatsu Product Range
After Sales Support Network of L&T
Our presence in Coal PSUs
CIL Tenders : Current Scenario & Our Suggestions
The way forward
2
Introduction : Larsen & Toubro
LARSEN & TOUBRO
Hydrocarbon
Employees
67,828 *
It’s all about Imagineering
Heavy Engineering
Sales Turnover
Rs 85,889 Cr #
L&T Construction
PBIT
Rs 7,489 Cr #
Power
Henning Holck-Larsen
Soren Kristian Toubro
(04.07.1907 – 27.7.2003)
(27.02.1906 – 04.03.1982)
1938...
Two Danish
Visionaries
A journey of
77 years…
Construction &
Mining Business
Electrical & Automation
...2015
Machinery &
Industrial Products
An Engineering
Behemoth
Information Technology
Financial Services
L&T Construction
Equipment Ltd (LTCEL)
Bangalore, Karnataka
HYDRAULIC EXCAVATORS
PC71 | PC130 | PC210
3 PC300 | PC450 | 300CK
KOMATSU INDIA PVT. LTD
Chennai, T.N
DUMP TRUCKS
HD465  60 Ton Class
HD785  100 Ton Class
> 50 Years
Experience
Ship Building
Railway Projects
# FY1314,
* As on March 31, 2014
CMB
Introduction : Komatsu
Established on May 13, 1921
Sales : USD 19.61 Billion
(FY1314)
Employees : 47,208
• Affiliates
• Liaison & Regional Offices
• Distributors
4
Komatsu Product Range
Model
PC8000
PC5500
PC4000
PC3000
PC2000
PC1250
PC800
Operating
WEIGHT
720
515
385
253
200
110
80
Model
WA1200
WA900
WA800
WA700
WA600
WA500
WA470
Model
5
BKT
CuM
42
29
22
15
12
6.5
4.5
Model
D575
D475
D375
D275
D155
Model
BKT
CuM
20.0
13.0
12.3
8.7
6.4
5.2
3.9
Flywheel
HP
WD420
WD500
224
315
WD600
585
WD900
853
960E
930E
830E
730E
HD1500
HD785
HD465
Blade
CuM
3.1
5.1
8~
22.5
34
Model
GD705
GD825
Flywheel
HP
200
280
Flywheel
HP
1150
899
636
452
360
Payload
TON
360
320
240
190
150
100
60
Blade
M
4.3
4.8
Tables denote Mining Equipment
Product Support : Infrastructure
• 5 fully equipped Service Stations
Jammu
and
Kashmir
• Pan India Coverage
Bahadurgarh
Punjab
• Training
Uttaranchal
Haryana
Sikkim Bhutan
Assam
Uttar
Pradesh
Rajasthan
Meghalaya
Bihar
Madhya
Pradesh
Gujarat
• Specialized Service
Durgapur
Himachal Pradesh
Tripura
Jharkhand
West
Bengal
Arunachal
Pradesh
Nagaland
Manipur
Mizoram
Chhattishgarh
• Testing Facilities
• Value added services
• Preventive Maintenance Clinics
• Annual / Full Maintenance Contracts
• Site Support Agreements
• On site Workshops
• Assy. Exchange Program
Maharashtra
Orissa
• Component Repairs
• RECON / REMAN
Pune
Andhra
Pradesh
Goa
Nagpur
• Spare Parts Support
Karnataka
• Central Ware house – Planning,
procurement & stocking of parts
Kerala
Tamil Nadu
Kanchipuram
6
Pan India Coverage
• Stocking points at 22 territories mainly
for insurance parts.
• Parts inventory at customer sites
Product Support : Facilities
Dump Truck Overhaul
Engine Repair Bay
Crankshaft Grinding Machine
Dozer Overhauling
Hydraulic Repair bay
Best-in-class Support
Infrastructure
Hydraulic Test Bench
7
Major MARC and SSA Projects
MARC Sites
HZL, DECO
45 | 35
HZL, DECO
31 | 62
SHREE, Beawar
7 | 25
NCL Singraui
59 | 48
BCCL
18| 8
SSA Sites
Tata,NM,JD,WB
26 | 29
(Machines | Manpower)
EMTA Pakur
79 | 69
Ultratech, KOT
14 | 17
EMTA, GRB, BRJ
9 | 11
Adani (A&M)
4|4
EMTA, Tara, BRJA
52 | 47
Lafarge,Sonadih
3|6
Holcim, Chanda
8 | 10
Ultratech, Gul
1|2
8
Rungta
12| 1
PLR, Sar
8|3
SAIL
15 | 5
Holcim, BTPRA
16 | 13
EMTA, Baranj
64 | 77
ESSEL (BCML)
4 | 13
SECL, Dpk, Gvr
9 | 10
Holcim, Maratha
6 | 11
SCCL, Manuguru
27 | 5
Dorajiya, Wani
5|1
SCCL, RMGDM
28 | 7
SHREE, Raipur
1|3
Dalmia, Trichy
12 | 10
HINDALCO
3|8
PLR, BKD
4| 3
Rich experience in
executing MARC & SSA
MARC : 497 m/c, 535 men at 52 sites
SSA : 62 m/c, 37 men at 8 sites
MARC : Maintenance & Repair Contract;
SSA : Site Support Agreement
Our association with Coal PSUs… Equipment
Model
Machine Type
SECL
NCL
MCL
HD785 100T
Dump Truck
25
58
05
ECL
BCCL
HD465 60T
Dump Truck
WCL
SCCL
Total
114
202
59
D475 860 HP
Dozer
11
GD825 280 HP
Motor Grader
05
02
WA800 10 Cu.m
FEL
02
04
59
13
WA600 6.4 Cu.m
FEL
01
PC2000 12 Cu.m
Hyd Excavator
02
24
07
01
07
01
PC1250 5.2 Cu.m
Hyd Excavator
9
CCL
supplied
01
07
09
05
06
300CK 4.0 Cu.m
Hyd Excavator
26
10
20
64
73
89
81
63
426
Total
69
84
25
70
74
149
81
189
741
Equipment supplied as on 20.01.2015; include orders under execution
Coal Mining… with a difference
2
19
Mission 1 Billion Tonnes !!!
Availability
Productivity
Guaranteed Parts Consumption
Safety Features
Environment Friendly
Operator Comfort
After-sales Support
Revamp equipment evaluation
&
selection criteria
10
Superior equipment performance – key to success
Mining Equipment Manufacturer : Concerns
 Equipment performance is the backbone of any mining company
 In India, as compared to global standards, the following parameters
have a lot of scope for improvement
› Equipment availability
› Equipment utilization
› Operators’ skill
› Maintenance practices
› Respect for safety and environment, etc
 With the advent of ICT*, the above have become easy to monitor
 The challenge for CIL is to incorporate such superior features in the
NIT scope and evaluation process
 Such steps shall contribute towards improving
utilization, thereby leading to enhanced productivity.
equipment
* Information & Communication Technology
11
This is the time to embrace the change
CIL Tenders :
Current scenario & our suggestions
TECHNICAL
Current Scenario
Our suggestion
Qualification criteria are extremely
broad-based
1. Re-introduce Technical Merit Rating
(TMR) system with adjusted bid price
mechanism
Deficiency :
1. No weightage for technical superiority
2. Discourages participation by
manufacturers of equipment with
advanced / latest features
Calls for Availability Guarantee (AG) of
1 - 3 years
Deficiency :
1. Does not value reliability over a
longer period of equipment life
2. The earlier system of disqualification
under TMR, may be done away with
1. AG for atleast 50% period of the
economic life of the equipment
2. Better rating for AG over & above NIT
2. Does not reward higher AG
achievement
Enlarging
participation cannot be the guiding factor for equipment procurement
12
CIL Tenders :
Current scenario & our suggestions
Current Scenario
No weightage is given for user's past
experience with the quoted models
Deficiency :
1. Achievement of AG for the stipulated
period (as per PO) is considered sufficient
for proven-ness
2. Low equipment utilization shields poor
equipment performance, if any, even if AG
is formally achieved
3. No mechanism to bring post-AG period
experience for evaluation
Guaranteed Parts Consumption
Deficiency :
1. Unused inventory
2. Tedious record keeping
Thus, no specific benefit to CIL
13
Our suggestion
TECHNICAL
1. Introduce :
a. MTBF (measure of equipment reliability)
b. MTTR (measure of after-sales support strength)
The above tools can be used to monitor
a. equipment performance for its lifetime
b. can form as input for evaluation of similar
equipment for subsequent tenders
2. In case of below-par past
performance of the quoted model :
a. Demand higher amount of PBG (Phase # 1)
b. Disqualification of the equipment model unless the
problem areas are rectified & proven
(Phase # 2)
Introduce ‘Cost Cap’ for spare parts.
Generates more value proposition for
buyer & seller; win-win situation
MTBF : Mean Time Between Failure;
MTTR : Mean Time To Repair
Expand proven-ness criteria : MTBF, MTTR alongwith AG
CIL Tenders :
Current scenario & our suggestions
Current Scenario
SAFETY, ENVIRONMENT & OPERATOR COMFORT
Has scope of improvement for inclusion of
safety & environment-friendly features
No weightage for features aiding
operator comfort
Deficiency :
Ignores the fact that operator comfort is key for
equipment utilization, productivity & fuel
consumption
Fails to fully utilize the after-sales support
capabilities of manufacturers
Deficiency :
1. Duplication of infrastructure at projects
2. Deprived of latest maintenance and
continuous improvement practices
Our suggestion
Latest safety standards & environment
friendly features (e.g. better emission
norms, higher oil change interval etc)
should be included in NIT
Latest standards on operator comfort
should be included in NIT
AFTER-SALES PRODUCT SUPPORT
1. Introduce rating system (based on
MTTR) for after-sales support
capabilities
2. Opt for long-term MARC to ensure best
performance for the entire economic
life of the equipment
MTTR : Mean Time To Repair; MARC : Maintenance & Repair Contract
14
Expand the horizon of evaluation by including other important elements
CIL Tenders :
Current scenario & our suggestions
COMMERCIAL
Current Scenario
Successful bidder is selected
only on L1 basis
Deficiency :
1. Discourage manufacturers of quality
equipment to seriously participate in
tenders
2. Deprives CIL of latest technologies and its
benefits to improve productivity &
reduce cost of production
100% order on L1 bidder
Deficiency :
1. Longer lead time for supply of the entire
fleet
2. Discourages competition
15
Our suggestion
Successful bidder should be determined
by adjusted bid price mechanism
This adjustment should be based on Technical
Merit Score (which should be re-introduced)
and should consist of the following :
a)
Technical features, especially those aiding
production & safety
b) AG, over & above NIT norm
c) After-sales support capabilities
Distribution of order between L1 and L2.
Will benefit CIL by :
1. Shortening of lead time
2. Keeping healthy competition amongst
suppliers
Create a level playing field for fair competition
CIL Tenders :
Current scenario & our suggestions
OB/COAL OUTSOURCING TENDERS
Current Scenario
Low duration of outsourcing contracts;
generally 3 or 4 years
Our suggestion
Increase the contract duration to
8 ~ 10 years
Illustration :
100T Dump Truck
Depreciation Cost (Rs / Hour)
2160
1296
648
3 Years
5 Years
10 Years
Current tenders are silent on minimum
size of equipment or specify very low sizes
Clearly mention the minimum size of
equipment as per the volume of
OB / Coal to be handled / year
No incentive for exceeding performance
parameters
Incentivize higher OB / Coal production
over the contracted quantities
16
Enable contractors to serve CIL better
Cost / BCM : An illustration …
100 Ton Dump Truck
Model
A
Model
B
Capital Cost (Rs Lacs)
₹ 360
₹ 300
Owning cost (Rs/hr)
₹ 1,162
₹ 1,350
Model A has longer economic life, resulting in lower Owning Cost
Operating cost (Rs / hr)
₹ 6,080
₹ 6,007
For both the models, Operating Costs are similar
O&O Cost (Rs / hr)
₹ 7,242
₹ 7,357
Working Hours / Year
4725
4500
Annual O&O Cost
(Rs Lacs)
₹ 342
₹ 331
Production (BCM/ hr) *
132
120
Annual Production (BCM)
6,23,700
5,40,000
Cost / BCM (Rs/BCM)
₹ 54.87
₹ 61.31
Remarks
Model A costs 20% higher than Model B
Better reliability & after-sales support shall result in additional working hours per year
for Model A (assumed 5% additional working hours)
Superior productivity, technical features, operator comfort etc will result in extra
production from Model A (Assumed 10% extra production)
15% higher annual production by Model A over Model B
Inspite of higher capital cost, Model A is the winner in terms of Cost/BCM on
equipment life-cycle basis.
10.50% savings
Note : The above is for illustration purposes only & should not be taken as any
17of guarantee
form
* Indicative for 1.5 km lead & 20 m lift haul road profile
The way forward…
Radical change in tender norms & evaluation criteria
1. Re-introduce Technical Merit Rating (TMR) system, incorporating
the following :
a. Technical features, especially those aiding production & safety
b. AG, over & above NIT norm
c. After-sales support capabilities
2. Successful bidder should be determined by Adjusted Price Bid
Mechanism, based on the above TMR
3. Constitute a Steering Committee to look into revamping the tender
norms & evaluation criteria.
18
Thank You
Thank You