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The digital world of Russia’s MMK


“MMK’s digitalization is not a revolutionary but an evolutionary process,” said Andrey Yeremin, MMK’s director for economics. “Digitalization has made us change our point of view on the data that the business generates. Now, data for us is the same as assets like rolling mills or furnaces, and it needs management.”

In 2015, the company generated a strategic initiative on Big Data and that was the first step towards digitalization, Yeremin said. “We, as a large metallurgical company, generate an incredible volume of data on all production streams,” he added. “Not to use this advantage means to be behind the times. We should learn how to collect and work with our data. That is why we have started to generate digital initiatives.”

Gradually, with the development of digital technologies, such as the internet of things, artificial intelligence, machine learning and vision, MMK has formed its strategic initiative for Industry 4.0.

“These technologies become more accessible, and they are so far developed now that we can efficiently implement them in the steel industry,” Yeremin told Metal Market Magazine.

In 2019, aiming to structure, synchronize and prioritize its efforts in digitalization, MMK invited Deloitte to help it create a 5-year digitalization strategy.

The number of digitalization initiatives is about 100. “For the moment we have implemented ansmall part of them in terms ofnvolume but very important part innterms of increasing efficiency,” saidnYeremin.

MMK has moved to a newnversion of Oracle’s enterprisenresource planning (ERP) system and implemented digital management systems through all of its production lines – that created a basis for further digital development. The next step was the creation of central corporate technology data storage. Before that all data was stored on different servers.

Building on that new approach to data storage, MMK has created a corporate system of technology and quality management, sales planning optimization, production scheduling and order fulfillment.

“Before it was managed by people, but there is a human factor – people can’t process such a large volume of data,” Yeremin said. “Now processes from order placement to fulfillment, and optimal production planning, are implemented and controlled by
machines,” he added.

Key initiatives
“We are supplementing people in routine operations by robots,” Yeremin said. “MMK has implemented about 80 robots in all parts of the business, from production and supply to finance and human resources,” he added. MMK sells some of these robot technologies to third parties.

For example, a robot can check in the railroad system whether or not a batch of scrap ordered for delivery to MMK’s address has been loaded from a particular contractor or not. If it has, the robot gives an order to MMK’s finance department to pay the relevant bill.

“We do not consider digitalization and automation as a tool to cut the size of the workforce. Maybe that will naturally happen, but it is not our aim,” he said. “The aim is higher efficiency of MMK’s business.”

Another initiative is to monitor and control gas emissions from MMK’s plants. The system uses data from automated systems, using gas measurement sensors, which control the composition of gas emissions, and identify emissions from any equipment that is out of norm. Reacting to that information, a control desk manages any equipment that caused abnormal emissions. The system also checks what happened with the relevant equipment and identifies what caused the abnormal emission.

“This system allows us to define a trouble spot and make repairs. That helps both environmentally and economically because the less emissions we have the less fuel we need to utilize and the energy costs are lower,” Yeremin explained.

MMK has also implemented a system that optimizes the consumption of ferro-alloys and supplementary materials consumed during steel production at the oxygen converter plant. This digital technology includes a physico-chemical model of the steel production and a machine learning algorithm.

“We estimate that this project has allowed us to reduce by 3% usage of the expensive raw materials needed in steel production,” Yeremin said. “Despite it saving a lot of money, investment in it was quite low because we signed an agreement with a company that had the required technology for machine learning and implemented the service on an outsourced basis.”

Additionally, MMK has integrated a physico-chemical model of the process. A purely theoretical mathematical model needed to be complemented by practical knowledge of the technology and an understanding of the steelmaking process, Yeremin explained.
MMK also increased its efficiency in maintenance and repair as part of implementing IT technologies. All of its equipment is included into a mobile maintenance and repairs application. It makes it possible to ensure the timely execution of both scheduled and unscheduled repairs, and to determine equipment defects early on.

“We use a radio frequency identification (RFID) tag system and install those on critical equipment like the exhauster. It is hard to access those for maintenance engineers to inspect, but RFID tags give all the information they require,” Yeremin said.

MMK analyzes the data provided by the system and can change the strategy for equipment service accordingly. That allows a decrease in breakdowns and unscheduled equipment downtime, increased equipment reliability and reduced repair costs.

To research and develop new digital initiatives, and monitor and control the results of the existing ones, MMK has created a digital office. In addition, MMK has an office in Skolkovo – a high-technology innovation center in Moscow – where the company finds all the most modern ideas “and if they can be implemented in the steelmaking we develop them,” said Yeremin.

To support the digital office, MMK has created its center of competence. “When the digital office wants to implement, for example, the internet of things technology in some process, the project managers come to the relevant competence center, where experts know everything about it,” he said. “They explain on what equipment tags are needed and what information they need to collect. Experts from the center of competence choose appropriate tags for this particular target and install them.”

Technologies such as RFID tags, machine vision and artificial intelligence have allowed MMK to implement such projects as a smart warehouse.

The effectiveness of the production process and the utilization rate of equipment depends on effective management of warehouses, Yeremin said. “In future, cranes will be automated and will move without people,” he said. “For the moment they are still managed by people, but placement of products in the warehouses is clearly defined and has a code, so crane operators know exactly where the product is located because they have a 3D model of the warehouse on the monitor.”

Planned investments for the digitalization strategy would amount to about 5 billion rubles (over $60 million) over 5 years, Yeremin noted. For 2021 in particular, investment is expected to be about 1.5 billion rubles (about $19 million).

“These numbers are direct investments into the strategy of Industry 4.0, but there are indirect investments as well,” he said. “We tell our suppliers that we are ready to buy only smart equipment,” Yeremin explained. “Now we will not install sensors on equipment by ourselves, but suppliers will ship equipment to us with required settings already installed,” he added.

That increases the price of the new equipment and creates indirect investment into digitalization. If these costs were included in MMK’s digital investment figures, the total would increase several-fold, Yeremin explained.

Among existing projects, maintenance and repair initiatives are the area that has seen the biggest investment. Among new projects, the company is making big investments in 3D technologies and digital twins of production processes.

The comprehensive computerbased simulation of real production processes provided by a digital twin enables new equipment settings to be tried out in advance of applying them to the real plant if they are found to be advantageous.

“To develop the production technology we should [conventionally] make a number of melts, and then a number of [trial] rollings. That takes time and capacity, leads to a reduction of commercial product output, and if we have not achieved the results required we have to repeat it all again,” Yeremin said. “But when you have used a digital twin and modeled all processes using it you avoid all these procedures and accelerate the process of developing new products,” he added.

He elaborated that what is simulated in a digital twin matches the results of subsequent real production 98% of the time, when MMK applies the same parameters on its physical equipment.

“We look on all initiatives which we implement in digitalization strategy in the light of return on investment (ROI),” Yeremin said. “Our projects in digitalization have a ROI from 1 to 3 years.”

MMK has found that the application of digital technologies has been particularly beneficial at the hot end of its steelmaking processes.

“Around 70% of costs in large metallurgical full-cycle companies are generated in the first production stream at the sintercoke stage and during pig iron and steel output,” Yeremin said. “That is why our first initiatives were related to these production stages, and where its effect is the most visible.”

Keeping control in pandemic
“The high level of digitalization and informatization allows us to make operation of the company more sustainable and competitive and it also becomes more visible during the pandemic, like in all other crises,” Yeremin said.

“Digital tools allow us to maintain normal operational processes in conditions of remote working; we even have managed to increase the effectiveness of operation,” he added.

In the conditions of remote working, an electronic document management system – ATACH, a product of MMK’s digitalization strategy – has helped the steelmaker a lot.

“Document workflow can seem not so important, but electronic document management allowed us to succeed to not lose control of the situation, and maintained a high speed of reaction to external changes,” he said. “This system was so very user-friendly and effective that we decided to commercialize it, and it is in high demand on the market now,” he said.

The first client-oriented service introduced by MMK is a mobile application for its own salespeople. It is also valuable for clients buying products because it allows a reduction in the time needed for
negotiations, and sellers can on-line give answers to customers on questions such as production capabilities, lead times and pricing conditions.

“This application allows the seller to calculate the margin of a deal, gives him information about available capacity, answers whether or not it is possible to fulfill the order in line within the time that the client wants and compares the current deal with previous similar deals – that helps to make a faster decision on whether to agree the sale or to continue to negotiate the price,” Yeremin explained.

A second client-oriented project is a mobile application called MMK Client. A buyer can see in this application what stage the process of his order fulfillment has reached and how the order is moving through production streams.

MMK Client also shows orders placed earlier and finalized orders, together with certification information, transportation details, invoices and schedules of payments.

Despite the fact that e-commerce is still at a relatively early stage of development in the steel industry and most sales continue to be made through negotiations with the steelmakers’ salespeople, MMK has also started a corporate marketplace project. It will allow customers to place orders directly on-line without the conventional negotiations with salespeople. The project is due to start by the second quarter of 2021 and should attract buyers of smaller quantities of steel, individual entrepreneurs, Yeremin said.

“Digital technologies will impact a lot of business development. Absolutely new business models will be created, and will change a lot in humans’ life in general,” he concluded. “This process is inevitable. Some jobs will disappear and people will switch from physical work to mental.”

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