operational management in steel plant
DESCRIPTION
The challenges that confront Steel industry in the age of globalization are complex in nature. The secret of sustainable turnaround lies in how steel industry faces the challenges and develops combative and anticipatory process. Most of the Problem can be solved by adopting and modifying their Operational Management strategy.TRANSCRIPT
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Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
Case Study
Operation Management In
Steel Plant
Santosh Kumar
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Content
1.Introduction
2.World Steel Production Scenario
3.Operational Process in steel industry
4.Fundamentals of Operational
Management
5.Operational Management in steel industry
6.Conclusion
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Introduction
The challenges that confront Steel industry in the age of globalization are complex in nature. The secret of sustainable turnaround lies in how steel industry faces the challenges and develops combative and anticipatory process. Most of the Problem can be solved by adopting and modifying their Operational Management strategy.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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World Steel Production Scenario
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Present Status and Future Projections World Steel Production (2012) : 1527 MT Indian Steel Production (2012) : 78 MT World Ranking in Production : 4th
Projected Capacity by 2016-17 : 150 MT Projected Capacity by 2019-20 : 200 MT Projected Capacity by 2030 : 500 MT
Indian Steel Production is bound to grow manifold in years to come to sustain Growth in infrastructure /Construction, Automotive , Capital Goods and Consumer Durable Sector i.e economic growth .
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Share of world crude steel production 2012, 2011
Source: World steel association, Brussels
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Steel Scenario
SN
Country 2013(Jan-Aug)
2012(Jan-Aug)
Rank in 2013
% of total world production
% Growth over prev. year Jan-Aug
1 World 1051 1025 - - +2.5%
2 Asia 706 666 - 67% + 6.0%
3 China 522 482 1st 49% + 8.3%
4 India 53 52 4th 5% +1.9%
Unit: million tons
Source: World Steel Organization (Formally IISI, Brussels)
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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World steel capacity utilization ratio
Source: World steel association, Brussels
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operational Process of Steel Plant
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Structure of Iron & Steel Industry in IndiaType of Plant Number of Units Total Capacity
(million tonnes per year)
BF-BOF based Integrated Steel Plant 8 30.0EAF Based Integrated Steel Plant 3 10.6EIF based plant 1170 28.8EAF/ EOF based mini steel plant 37+2 9.5Gas Based DRI plant 3 8.0Coal Based DRI plant 418 26.6Mini BF based Pig Iron plant 42 -Ferro Alloy Units 173 4.0Hot Re-Rolling Mills 1794 40.8Cold Re-Rolling Mills 65 10.2Galvanising Units 20 5.6Colour Coating Units 6 0.5Tin Plate Units 2 0.3Wire Drawing Units 69 1.2Indian Steel Industry is highly fragmented with a variety of process routes and thousands of small & medium units for iron & steel making and also downstream processing
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Process Routes in Integrated Steel Plants in India
Plant Process Route
Annual Capacity (million tonnes)
SAIL, BSP, Bhilai BF-BOF/THF 3.9SAIL, DSP, Durgapur BF-BOF 1.8SAIL, RSP, Rourkela BF-BOF 1.9SAIL, BSL, Bokaro BF-BOF 4.4SAIL, ISP, Burnpur BF-BOF 0.5RINL, VSP, Vizag BF-BOF 2.9NINL, Jajpur BF-BOF 1.1Tata Steel, Jamshedpur BF-BOF 6.8
JSW Steel, Bellary BF/Corex-BOF 7.8JSW Ispat Steel, Dolvi DRI/BF-Con Arc 3.6
JSPL, Raigarh DRI/BF- AC EAF 2.4Essar, Hazira DRI/HBI/BF/Corex- DC EAF 4.6
Even in Integrated Steel Plants, diverse process routes for iron making are adopted, not visible elsewher.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Fundamentals of
Operational Management
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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3 Basic Functions of Business Organizations
Ensure and allocating financial resources
Produce goods or services
Assess consumer needs, and sell /
promote goods or services
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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• Operations management (OM) is the science and art of ensuring that goods and services are created and delivered successfully to customers.
• The principles of OM help one to view a business enterprise as a total system, in which all activities are coordinated not only vertically throughout the organization, but also horizontally across multiple functions.
Operations management is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
Operations Management (Coke Zone, Iron Zone, Steel Zone, Mill Zone)
Inputs(Raw
materials)
Outputs(Coke, Pig
Iron & steel )
What is Operations Management?
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations: A Transformation Process
Workers
Managers
Equipment
Facility
Materials
Land
Energy
Information
Goods
Services
Inputs Outputs
Operations and
processes
Feedback
Performance
Lead time The time between ordering a good or service and receiving it.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Production SystemsSystem Inputs Conversion Output
(desired)
Hospital PatientsMDs, NursesMedical SuppliesEquipment
Health Care HealthyIndividuals
Restaurant Hungry CustomersFood, ChefServersAtmosphere
Prepare FoodServe Food
SatisfiedCustomers
AutomobilePlant
Sheet SteelEngine PartsTools, EquipmentWorkers
Fabricationand Assemblyof Cars
High QualityAutomobiles
University High School GradsTeachers, BooksClassroom
Transferringof Knowledgeand Skills
EducatedIndividuals
6Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations Management
The management of systems or processes that create goods
and/or provide services.
◦ Planning
◦ Coordinating
◦ Executing
Operations function consists of all activities directly related to producing goods or providing services.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Responsibilities of Operations Manager
Products & services
Planning
– Capacity
– Location
–– Make or buy
– Layout
– Projects
– SchedulingControlling/Improving
– Inventory
– Quality
Organizing
–Degree of centralization
–Process selection
Staffing
– Hiring/laying off
–Use of OvertimeDirecting
–Incentive plans
–Issuance of work orders
–Job assignments
– Costs
–Productivity
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations Management includes:
◦ Forecasting
◦ Capacity planning
◦ Scheduling
◦ Managing inventories
◦ Assuring quality
◦ Motivating employees
◦ Deciding where to locate facilities
◦ And more . . .
Scope of Operations Management
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Why is Operations
Management
Important?
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Reasons to Study Operations Management
50% or more of the jobs in industry are operations management-related:◦Customer Service◦Quality Assurance◦Production Planning◦Scheduling◦Inventory Management◦Logistics
Operations Management activities are at the core of all business organizations.
All Other Functional Areas are interrelated with Operations Management
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations as Technical Core
Operations
Finance
Capital Markets, Stockholders
Marketing
Customers
Work
ers
Sup
plie
rs
Pu
rchasi
ng
Pers
on
nel
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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The Overlapping of Three Major Functions
Operations
FinanceMarketing
• Budgeting• Economic
analysis of investment proposals
• Provision of funds
……• Financial
indicators
• Competitor• Customer
preference• Trend of
technology …… • Judgment of
manufacturability
• Fulfillment lead time
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Major Characteristics of Operations Process
Type of Conversion
1.Project Shop2.Job Shop (Batch Shop)3.Assembly Line4.Continuous Process
ProductMix Size
FewMany(Several)FewSingle
ProductionVolume
Single or FewLow(Medium)HighVery High
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Today's Factors Affecting OM
Global CompetitionQuality, Customer Service, and Cost ChallengesRapid Expansion of Advanced TechnologiesContinued Growth of the Service SectorScarcity of Operations ResourcesSocial-Responsibility Issues
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Why Study Operations Management?
OperationsManagement
Business Education/Career Opportunities
Systematic Approachto Org. Processes
Increase Competitive Advantage/Survival
Cross-FunctionalApplications
3Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations Decision Making
People Plants Parts Processes
Planning and Control
Materials &Customers
Products &Services
Input Output
Operations Management
Marketing StrategyFinance Strategy
Marketplace
Corporate Strategy
Operations Strategy
4Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Strategy Begins with Priorities
1. How would we segment the market according to product group?
2. How would we identify product requirements, demand patterns, and profit margins for each group?
3. How do we identify order winners and order qualifiers for each group?
4. How do we convert order winners into specific performance requirements?
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Manufacturing’s Role in Corporate Strategy
Stage I--Internally Neutral - minimize potential manufacturing negative
Stage II--Externally Neutral - achieve parity with competitors
Stage III--Internally Supportive - support business strategy
Stage IV--Externally Supportive - manufacturing based competitive strategy
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operations Strategy
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes and Infrastructure
ExampleStrategy Process
More Product
Increase Org. Size
Increase Production Capacity
Build New Factory
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Core services strategyCore Services are basic things that customers want from products that they purchase.
Quality Flexibility Speed Price (or production cost)
10SAIsej Consultancy Services Ponevt.Ltd, Bhubaneswar
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Competitive Dimensions Cost Quality and Reliability Delivery
◦ Flexibility◦ Speed◦ Reliability
Coping with Changes in Demand New Product Introduction
◦ Speed◦ Flexibility
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Competitiveness Drivers
Product Development◦ speed development & enhance manufacturability
Waste Reduction (JIT Philosophy)◦ WIP, space, tool costs, and human effort
Improved Customer-Supplier Relationships◦ borrowed from Japanese Keiretsu
Improved Leadership◦ strong, independent boards of directors
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operational Management
in
steel industry
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Iron ore
Pellet
Limestone
Coke
Sinteredore
Blast furnace(BF)
Hot metal
Basic oxygen furnace(BOF)
Scrap
Iron making
Electric arc furnace(EAF)
Steel making Continuous casting
Hotdirectrolling(HDR)
Billet
Bloom
Slab
Reheating furnaceSteel casting
Rolling
Seamless pipe millSeamless pip
Welded pipe mill
Welded pipeButt welded pipe
Cold rolling tandem mill
Cold rolled coiland sheet(also for plating)
Hot strip mill
Hot rolled coiland sheet
Main products
Plate mill
Plate
Wire rod mill
Wire rod
Section mill BarShapeSheet pileRail
Steel Plant Operational Process
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Steel Plant Operational Process
Inputs Processing Outputs
Raw Material - Coal- Iron Ore - FluxWaterEnergyLaborBuildingEquipment
Coke OvenSinter PlantBlast FurnaceBOFCCP
BF CokeSinterPig IronSteel
Consumer Feedback
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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People, Culture & Organization
ProjectSchematic diagram for organization structure in Indian steel plant
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Strengths Weaknesses
1. Availability of iron ore and coal
2. Low labor wage rates
3.Abundance of quality manpower
4. Mature production base
1. Unscientific mining
2. Low productivity
3. Coking coal import dependence
4. Low R&D investments
5. High cost of debt
6. Inadequate infrastructure
Opportunities Threats
1. Unexplored rural market
2. Growing domestic demand
3. Exports
4. Consolidation
1. China becoming net exporter
2. Protectionism in the West
3. Dumping by competitors
SWOT Analysis of the Indian Steel Industry
Source: National Steel policy 2005, Ministry of Steel, GoI
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Major Challenges & Opportunities for Indian Steel Industry
Opportunities:• Availability of Raw material • Consistency in final product due to advance level of automation for
process control. • Environmental Issues and air pollution• Strong network of market (All product is marketed by M/s MMTC
limited)
Challenges behind Indian steel industry• Volatile Steel price. • Utilizing Maximum plant efficiency. • Higher Energy Consumption as compared to international benchmark. • Volatile demand and Supply. • High Competitiveness among small Players. • Lack of Product branding. • Higher Number of Breakdowns.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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MarketingSales promotionAdvertisingSalesMarket research
OperationsFacilities Construction; maintenance
Production and inventory control Scheduling; materials control
Quality assurance and controlSupply chain managementManufacturing Tooling; fabrication; assembly
Design Product development and design Detailed product specifications
Industrial engineering Efficient use of machines, space, and personnel
Process analysis Development and installation of production tools and equipment
Finance/ accountingDisbursements/ credits Receivables Payables General ledgerFunds Management Money market International exchangeCapital requirements Stock issue Bond issue and recall
Manufacturing
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Steel Plant: Operational Management
Forecasting: Grade of steel & Pig Iron in Demand
and in order.
Capacity Planning: According to sales order in
pipe-line and demand scenario
Scheduling: Scheduling of production plan of each
units
Quality: Quality of the Product.
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Factors Affecting on Steel Plant Performance
Economic/Political
exchange ratestrade barrierscapital costsinflation
capital availabilitysocial costs/legalfunds flowssavings rateinterest ratesminimum wage
Environmental/social
Env. protection
health costs
labor unions
education system
consumer tastes
retailing capabilities
employee
External
transportation costs
logistics resources
labor supply, capabilities
training resources
communications
public infrastructure
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Factors Affecting on Steel Plant Performance
Corporate
strategy
risk avoidance
role of functions
Fin-Mktg-Mfg-Eng-R&D
balance sheet
financial capacity
marketing policies
export sales competencies
Technological sophistication of mgt
Technological
R&D
engineering
product development
process development
new products
development process
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Suppliers
abilities
coordination
location
competition
cooperation
Operationscosts/productivity
qualitydelivery cycledelivery reliabilityflexibility for prod changeflexibility for vol. changeNew product introduction
inventory mgt.Prod. Planning ControlEquip. & process tech
size, location of facilitieslogistics
customer serviceinformation technology
WS6
Factors Affecting on Steel Plant Performance
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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KEY PROCESS TO ACHIEVE THE GOAL : BENCHMARKING
COST REDUCTION● Reducing operating costs● Reduction in working capital costs● Substitution of raw material● Social infrastructure costs● Differentiated sourcing● Effective supply chain management
OPERATIONAL EFFICIENCY● Asset utilization efficiency● Capital productivity● Labour productivity● Yield improvement
Operational Strategy for Operational Excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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KEY PROCESS TO ACHIEVE THE GOAL : PROFIT CENTRE APPROACH AND INTERNAL CUSTOMER MODEL
REVENUE MAXIMISATION● Maximizing net sales realization ● Effective product/market analysis● Increasing customer base● Penetrating marketing communication● Debtor’s management
FINANCIAL RESTRUCTURING● Asset restructuring● Strategic cost reduction across the board
● Divestment in non-core business
Financial Strategy for Operational excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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BUSINESS RESTRUCTURING● Redesigning key corporate processes● Consolidation and collaboration
OPERATIONAL RESTRUCTURING● Management systems and structure● Capital productivity● Steel servicing
MARKET EXPANSION● Enhancing steel consumption● Augmenting marketing services
Financial Strategy for Operational excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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KEY PROCESS TO ACHIEVE THE GOAL: CONTINUAL IMPROVEMENT & SUSTAINABLE STRATEGIC TURNAROUND
STRATEGIC RESEARCH● Identification of priority areas● Quality improvement● Customized product development
TECHNOLOGY PLANNING● Stage-wise adoption of latest technology● Process automation● Eco-friendliness as key parameter
INTEGRATED IT STRATEGY● Networking with customers, suppliers● Widespread IT application● E-commerce
MODERN HRD STRATEGY MARKET SUSTENANCE ● Establishing brand equity of steel ● Customer loyality
Corporate Strategy for Operational Excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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The core values and concepts of operational excellence are embodied in seven categories: • Leadership; • Strategic Planning; • Customer Focus; • Measurement, Analysis and Knowledge Management; • Workforce Focus; • Process Management and Outcomes of Financial and
Non Financial Parameters; and • Business Results.
Core Values for Operational excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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The Operational Excellence through effective operational management focuses on certain key areas of business performance:
• Customer-focused Results; • Product and Service Results; • Financial and Market Results; • Human Resource Results; • Organizational Effectiveness Results; • Governance and Social Responsibility Results.
Core Values for Operational excellence
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Important Points in Effective OM
Forecasting--determining what the future holds in terms of product demand, raw material prices, etc.
Quality Management/Quality Control--making certain that the products and services provided are of the highest possible integrity
Just-In-Time Production (JIT)--minimizing waste, in-process inventories and maximizing flexibility
Material Requirements Planning (MRP)--getting the right parts to the right place at the right time
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Scheduling--planning the production of goods and services in the most efficient possible way
Technology--exploring uses of technology and automation in manufacturing and providing of services
Supply Chain Management / Logistics
Important Points in Effective OM
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Operational Excellence
Customar
Satisfaction,
Employee
satisfaction
Alignment
between HR,
Information
Management,
Services and
Production
Process Manage
ment
Organizational Leaders
hip, Strategy
for Turnaro
und,
Corporate
Governance,
Business Result
Continual Improvement
Continual Improvement
Continual ImprovementContinual Improvement
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Conclusion
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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The challenges that confront Indian steel industry in the age of globalization are complex in nature. The secret of sustainable turnaround lies in how Indian steel industry faces the challenges and develops combative and anticipatory process.
The achievement of operational excellence often required a significant cultural change in operational Management in order to be sustained. Operational Management process must be well planned and coordinated so that employees are involved throughout the process and that all improvement activities occur in a coordinate manner.
Conclusion
Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
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Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha