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Operational improvements are an ongoing journey

Keywords: Tags  global steel executives, Accenture LLP, PricewaterhouseCoopers LLP, PwC, operational improvements, Fulton County Processing Ltd., Delta, Steel Technologies de Mexico SA de CV NuMit LLC

NOTE: Total exceeds 100 percent due to multiple responses.

When it comes to recognizing factors essential to their businesses, steel executives place improving operational effectiveness near the top of their list of priorities.

In a recent AMM survey of global steel executives, operational improvements came in as the fourth-most important strategic initiative or challenge facing their businesses through the end of 2014. And in answering a more specific question, respondents said innovations or technological breakthroughs keyed to improving the cost, efficiency and productivity of mill and plant floor production and operations were the most critical to their organization’s success.

“Companies need to incorporate tactical areas and optimization with core assets to drive improvement for the long term,” Mehul Jain and Andrea Paciaroni wrote in a report from Chicago-based Accenture LLP, a global management consulting, technology services and outsourcing company. “Core assets include strong governance, defined processes and supporting technologies. The assets can combine to sustain a continuous improvement culture.”

Several steel executives have echoed those views. In the latest survey conducted by AMM on behalf of London-based PricewaterhouseCoopers LLP (PwC), only the issues of expanding customer base, managing people and talent and managing raw materials were considered more important strategic initiatives or challenges for 2014. But when it came to what type of technology or innovation is most critical to an organization’s long-term success, operational improvements were ranked at the top.

“Production/operation topped the list again in 2013 by steel executives as the technology or innovation that is most critical to their organization,” Sean Hoover, metals leader for PwC’s U.S. industrial products practice, said. “This is an issue that continues to be recognized as critical to ongoing success.”

“Expansion has always been our goal,” said Jeff Kunkel, general manager of Delta, Ohio-based Fulton County Processing Ltd. (FCP), a state-of-the-art steel coil processing company that is installing a new hydrochloric push/pull pickling line this year. “Significant customer input has been put into planning this new capacity, and we are thrilled to see it now come to fruition. This is just one of the many steps we are taking to ensure that FCP can fulfill the needs of our growing customer base today and tomorrow.”

While companies may have several motives for operational improvements, cost efficiency becomes one of the more immediate driving factors during economic challenges.

“Many companies have firmly entrenched business processes, incurring higher costs due to redundant people working on non-value-adding tasks,” the Accenture report said. “Complexity builds up over time and undermines efficiency and also slows down decision making. The result: siloed, bureaucratic and slow-moving organizations. For companies seeking to achieve sustainable cost reduction, optimization of key processes is essential.”

Companies may have the preferred processes in their mills and also have established performance management but lack a continuous improvement culture, Jain and Paciaroni said, adding that cultural deficiencies are typically not due to a lack of improvement opportunities but rather from a lack of structural support.

“Well-defined processes also contribute to continuous improvement. Standard tasks, roles and procedures efficiently convert valuable knowledge into cost reduction for the mill,” the Accenture report said. “Brainstorming and evaluating improvement ideas should become part of the weekly routine. A central repository can capture ideas that can be selected and approved for implementation. Selected ideas are given to a well-structured implementation process, with the result being that people throughout the organization have confidence in how improvements are selected and implemented.”

Several companies have implemented or announced pending key operational improvements in the past year or so, providing glimpses into the importance and potential efficacy of such decisions.

The pickling line at FCP is one such example. The $20-million project will require an 82,000-square-foot expansion to the company’s plant adjacent to the NorthStar/Bluescope steel mill in Delta to house the new line, provide additional storage space and increase rail car capacity.

“This new line will not only increase the production capabilities of the plant,” Kunkel said, “but it will allow us to capture a significant amount of business that has been leaving the area.”

Meanwhile, Steel Technologies de Mexico SA de CV recently installed five Red Bud Industries Inc. processing lines--four at its greenfield site in Pesquer’a in Nuevo Le—n state and the fifth at a greenfield site in Celaya in the central state of Guanajuato. Steel Technologies de Mexico is part of Louisville, Ky.-based Steel Technologies LLC, which is owned by NuMit LLC, a joint venture between Charlotte, N.C.-based Nucor Corp. and New York-based Mitsui & Co. (USA) Inc.

Last year, Evraz Inc. North America’s project to expand its feedstock operation from scrap to melt shop was recognized as the Best Operational Improvements in AMM’s fourth annual Awards for Steel Excellence.

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