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Operational Management in steel plant

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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.

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Operational Management in steel plant

  1. 1. Neelachal Ispat Nigam Limited, Kalinganagar, Odisha Case Study Operation Management In Steel Plant Santosh Kumar
  2. 2. 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
  3. 3. 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
  4. 4. World Steel Production Scenario Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  5. 5. 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
  6. 6. Share of world crude steel production 2012, 2011 Source: World steel association, Brussels Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  7. 7. Steel Scenario S N 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
  8. 8. World steel capacity utilization ratio Source: World steel association, Brussels Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  9. 9. Operational Process of Steel Plant Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  10. 10. Structure of Iron & Steel Industry in India Type of Plant Number of Units Total Capacity (million tonnes per year) BF-BOF based Integrated Steel Plant 8 30.0 EAF Based Integrated Steel Plant 3 10.6 EIF based plant 1170 28.8 EAF/ EOF based mini steel plant 37+2 9.5 Gas Based DRI plant 3 8.0 Coal Based DRI plant 418 26.6 Mini BF based Pig Iron plant 42 - Ferro Alloy Units 173 4.0 Hot Re-Rolling Mills 1794 40.8 Cold Re-Rolling Mills 65 10.2 Galvanising Units 20 5.6 Colour Coating Units 6 0.5 Tin Plate Units 2 0.3 Wire Drawing Units 69 1.2 Indian 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
  11. 11. Process Routes in Integrated Steel Plants in India Plant Process Route Annual Capacity (million tonnes) SAIL, BSP, Bhilai BF-BOF/THF 3.9 SAIL, DSP, Durgapur BF-BOF 1.8 SAIL, RSP, Rourkela BF-BOF 1.9 SAIL, BSL, Bokaro BF-BOF 4.4 SAIL, ISP, Burnpur BF-BOF 0.5 RINL, VSP, Vizag BF-BOF 2.9 NINL, Jajpur BF-BOF 1.1 Tata Steel, Jamshedpur BF-BOF 6.8 JSW Steel, Bellary BF/Corex-BOF 7.8 JSW Ispat Steel, Dolvi DRI/BF-Con Arc 3.6 JSPL, Raigarh DRI/BF- AC EAF 2.4 Essar, 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
  12. 12. Fundamentals of Operational Management Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  13. 13. 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
  14. 14. • 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
  15. 15. 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
  16. 16. Production Systems System Inputs Conversion Output (desired) Hospital Patients MDs, Nurses Medical Supplies Equipment Health Care Healthy Individuals Restaurant Hungry Customers Food, Chef Servers Atmosphere Prepare Food Serve Food Satisfied Customers Automobile Plant Sheet Steel Engine Parts Tools, Equipment Workers Fabrication and Assembly of Cars High Quality Automobiles University High School Grads Teachers, Books Classroom Transferring of Knowledge and Skills Educated Individuals 6Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  17. 17. 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
  18. 18. Responsibilities of Operations Manager Products & services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling/Improving – Inventory – Quality Organizing – Degree of centralization – Process selection Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments – Costs – Productivity Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  19. 19. 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
  20. 20. Why is Operations Management Important? Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  21. 21. 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
  22. 22. Operations as Technical Core Operations Finance Capital Markets, Stockholders Marketing Customers Workers Suppliers Purchasing PersonnelSantosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  23. 23. 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
  24. 24. Major Characteristics of Operations Process Type of Conversion 1.Project Shop 2.Job Shop (Batch Shop) 3.Assembly Line 4.Continuous Process Product Mix Size Few Many (Several) Few Single Production Volume Single or Few Low (Medium) High Very High Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  25. 25. Today's Factors Affecting OM Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  26. 26. Why Study Operations Management? Operations Management Business Education/ Career Opportunities Systematic Approach to Org. Processes Increase Competitive Advantage/Survival Cross-Functional Applications 3Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. Operations Strategy Customer Needs Corporate Strategy Operations Strategy Decisions on Processes and Infrastructure Example Strategy Process More Product Increase Org. Size Increase Production Capacity Build New Factory Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  31. 31. Core services strategy Core Services are basic things that customers want from products that they purchase. Quality Flexibility Speed Price (or production cost) 10 SAIsej Consultancy Services Ponevt.Ltd, Bhubaneswar
  32. 32. 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
  33. 33. 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
  34. 34. Operational Management in steel industry Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  35. 35. Iron ore Pellet Limestone Coke Sintered ore Blast furnace (BF) Hot metal Basic oxygen furnace (BOF) Scrap Iron making Electric arc furnace (EAF) Steel making Continuous casting Hot direct rolling (HDR) Billet Bloom Slab Reheating furnace Steel casting Rolling Seamless pipe mill Seamless pip Welded pipe mill Welded pipe Butt welded pipe Cold rolling tandem mill Cold rolled coil and sheet (also for plating) Hot strip mill Hot rolled coil and sheet Main products Plate mill Plate Wire rod mill Wire rod Section mill Bar Shape Sheet pile Rail Steel Plant Operational Process Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  36. 36. Steel Plant Operational Process Inputs Processing Outputs Raw Material - Coal - Iron Ore - Flux Water Energy Labor Building Equipment Coke Oven Sinter Plant Blast Furnace BOF CCP BF Coke Sinter Pig Iron Steel Consumer Feedback Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  37. 37. People, Culture & Organization Finance Business Process Technology (Technical & Scientific services) Production Process Project Schematic diagram for organization structure in Indian steel plant Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  38. 38. 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
  39. 39. 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
  40. 40. Marketing Sales promotion Advertising Sales Market research Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply chain management Manufacturing 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/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Manufacturing Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  41. 41. 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
  42. 42. Factors Affecting on Steel Plant Performance Economic/Political exchange rates trade barriers capital costs inflation capital availability social costs/legal funds flows savings rate interest rates minimum 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
  43. 43. 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
  44. 44. Suppliers abilities coordination location competition cooperation Operations costs/productivity quality delivery cycle delivery reliability flexibility for prod change flexibility for vol. change New product introduction inventory mgt. Prod. Planning Control Equip. & process tech size, location of facilities logistics customer service information technology WS6 Factors Affecting on Steel Plant Performance Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  45. 45. 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
  46. 46. 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
  47. 47. 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
  48. 48. 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
  49. 49. 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
  50. 50. 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
  51. 51. 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
  52. 52. 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
  53. 53. Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  54. 54. Operational Excellence Customar Satisfaction, Employee satisfaction Alignment between HR, Information Management, Services and Production Process Management Organizational Leadership, Strategy for Turnaround, Corporate Governance, Business Result Continual Improvement Continual Improvement Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  55. 55. Conclusion Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha
  56. 56. 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
  57. 57. Santosh Kumar, Manager (Steel), Neelachal Ispat Nigam Limited, Kalinganagar, Odisha

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