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| Every steel mill is exposed to changes that are beyond their direct control. For example US steel tariffs, shrinking markets, or growing competition. However there is one guaranteed way of ensuring the success of a plant - by making it the lowest cost, highest quality producer in the market. While this is the aim of hundreds of directors, managers and steel workers across the world there lies hidden in nearly every steel mill the potential to reduce the cost/tonne by approximately 10%. The method for doing this is straight forward, yet very few have been able to deliver the step change in performance. |
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| Here’s why: |
- In nearly every steel mill the top operational issues are not financially valued
- The top issues do not have the appropriate resource allocated to them
- The top issues are not being permanently resolved.
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| Can this really be true? To answer this we need to take these statements one at a time: |
In a perfect world, processes would run consistently at maximum speed with no waste and no downtime while efficiency would be 100%. Any company that achieved this would be the lowest cost producer and dominate their market. No mills are perfect, but unfortunately very few mills have an accurate picture of what issues are the biggest. There is certainly no lack of opinion however; in a recent management workshop at one of Europe’s biggest steel mills 8 senior operations managers were asked to list the mill’s top 3 problems, and give them an annualised financial value. How closely would you expect them to agree? This mill has some of the most sophisticated measurement and control equipment available. It has a large IT department and some of the most talented engineers and managers in the industry. If we score their top choice problem with 3 points, their second with two and their third problem with 1 then you would expect to see results like this:
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| After this exercise the managers agreed that each of them have a ‘pet problem’, one that they care about and would most like to see resolved. This usually featured as their no. 1 choice. They also agreed that there can only be one correct answer, that the data probably exists within the mill to calculate the correct answer, but there was no one report that compared, valued and prioritised each issue. |
| A mill with no agreement of what the biggest issue is unable to decide how much time and effort to invest in different problems. Worse still, each manager has different priorities and objectives. This means that the biggest issue (for there will be just one issue that is actually the biggest) is unlikely to have the attention it deserves. |
| If we ignore for a moment that most people chose a different top problem, you would hope that the value of the mill’s biggest problem is estimated to within a small range. In reality the value of the 8 top problems ranged from £40,000 to £8 million, with an even spread between these two figures. How can this management team decide how much resource, be it people or money, to allocate to individual problems if they have no clear vision of the cost of a problem? |
| Absolutely. Similar exercises have taken place in both European and American mills and the results are staggeringly similar. |
| There are three elements that determine how easy it is to report all operational issues simply, clearly and at the touch of a button: |
- The absolute potential of each process must be determined. For most processes this is relatively straight forward – the absolute potential may be defined as zero waste and continual casting at 4m/min, with a furnace life of X and energy consumption of Y. If we are going to understand every loss in performance we must measure against the absolute potential. It is therefore we should not build in ‘excuses’. For example the operations team at a plate mill could not decide whether to measure their process against 3.2m/m (the original design speed) or 3.0 m/m (the best they could achieve). If they had measured against 3.0m/m then their report would not have shown them the value of the 0.2m/m loss in speed, which it transpired, was worth $8 million per annum. This was actually their no.1 issue, and with the will of the entire team behind them they were able to solve the ‘slag carry over’ problem and increase speed to an average 3.16 m/m, making an extra $6 million for the plant over the following year.
- The second element is the ability to collect the data required to calculate the issues. These include actual process speeds, process outputs, waste levels etc, as well as the costs and sales price so that additional output can be valued. In the steel industry this is usually the most straightforward step due to the process control and monitoring systems in the industry. The value of increasing process efficiency is very high in the steel industry.
- Take a process that produces 1Mt/y at a cost/tonne of $1,200 and profit/tonne at $150. If this processes efficiency is increased by 100,000 t/y then the additional profit is far in excess of $150 x 100,000. This is because the only extra costs associated with extra tonnes are additional materials, utilities and distribution. You don not have to pay for additional labour, depreciation, or fixed overheads. This can often mean the profit from additional tonnage is $300-$500, or about 3 times as valuable as production.
- The third element is creating a robust analysis program that is able to turn the data into simple reports. There are some ‘off the shelf’ packages that claim to be able to do this, although in reality it is usually beneficial to build this system in house. This gives the added advantage of being able to develop, tailor and adapt the system.
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| The most successful systems generate reports similar to this: |
- A daily graph of the mills losses over the past 24 hours
- A weekly graph of the mills losses for the past 7 days
- Trends of the top biggest problems over the past 4 months
- Trends of the KPIs
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| Having a clear understanding of where the mill’s potential lies, on a daily, weekly or monthly basis is only the start of reducing costs. The correct resource must be allocated to the correct issues, be given enough time, have the right skills and have the desire to resolve the problem. Achieving this mix is not easy. Few mills have ‘spare people’, and so time must be found by understanding what tasks are more important than working on the biggest issue? In the example of the US plate mill the Chief engineer had focused his best people on developing the maintenance program along a RCM route. This was seen as the department’s number 1 priority until he examined the top losses. It showed him that process reliability problems did not fall into the mill’s top 6 issues, and was almost insignificant in value when compared to the slower casting speed. When he turned his team’s attention to this ‘new’ problem results came quickly. Resource allocation becomes significantly easier when the right information is available. |
| By holding short daily performance review meetings and using the daily report as a prompt, the top issues of the day will have people allocated to them. Problems, which are not able to be resolved on a daily basis, or add up over a week to be significant, are reviewed at a weekly review. Most managers have had training and plenty of experience of running meetings. However there are a few golden rules to ensure that these are effective: |
- Only review the top issues, have the discipline not to focus valuable resource towards the small issues
- Ensure the meeting is action orientated
- Have a ‘by who’ and ‘by when’ by each action
- Daily reviews should last no more than 20 minutes, weekly reviews 45 minutes
- Do not discuss the details of problems in the meeting
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| An area of potential that this system is particularly effective at uncovering is the shorter duration stops that happen frequently. An example of this is a UK cold rolling line. 3 to 4 times per day this line developed a transfer problem, which caused small reels to be kicked out after 3-5 minutes. These reels could not be sold and therefore the time on the process had been wasted. While this was inconvenient for the production team it was not until the reporting system valued this as their third biggest problem, at £900,000 per annum, that anyone really turned their attention to it. Within 3 weeks the problem was permanently resolved. Why had this problem gone almost unnoticed? This diagram helps explain: |
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| This process has been used across Europe and the US, and in industries such as paper, packaging and aluminium smelting. It has generated millions of dollars worth of cost savings. On average £2-£5 million dollars extra profit is generated per site. It gives new clarity and guidance to a mill’s management team. Examples of recent results from 2 projects show dramatic reductions in cost/tonne and increases in productivity. |
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| In most of the world’s steel mills lies hidden potential which can be uncovered and clearly understood if the correct analysis is carried out. By using this information effectively to allocate the appropriate resource more than 10% can be removed from steel production costs. These results can be achieved within a few months, and dramatically improve the future success and security of steel mills. |
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