SAP Variant Configurator @ Essar A perfect symphony of ... · PDF fileA perfect symphony of Metallurgy & Information Technology September 11, 2012 ... • SAIL has entered into a JV

SAP Variant Configurator @ Essar

A perfect symphony of Metallurgy &

Information Technology

September 11, 2012

SAP Mining & Metals Forum Mannheim

Suneel Aradhye Sr VP and CIO

Essar Steel India Ltd

Agenda

Indian Steel Industry & Indian Economy

Overview of Essar

Business Challenges: Why VC

The VC Model

Value Addition

2

Growing

investments

• 222 MoUs have been signed by various states such as Orissa, Jharkhand,

Chhattisgarh, Gujarat, Karnataka for planned capacity of about 276 MT

• Investment in infrastructure, the largest consumer of steel, is expected to

be USD 1 trillion by 2017

Vertical integration

• The major players in the industry, such as Tata Steel and SAIL have

vertically integrated to secure raw materials

• Tata Steel is self-sufficient in iron ore and coking coal supply; SAIL is self

sufficient in iron ore

Strategic alliances

• Global players have entered into JVs with Indian steel majors as the

greenfield projects would have longer gestation

• Sumitomo Metal has partnered with Bhushan Steel for technological and

marketing collaboration

• SAIL has entered into a JV with POSCO to have FINEX technology at its

Bokaro plant

Entry of

International

companies

• Attracted by the growth potential of the Indian steel industry, several global

steel players have been planning to enter the market

• Arcelor Mittal and POSCO have planned mega greenfield projects at

various locations in India

Indian Steel Industry & Indian Economy

References: RNCOS Report, Media Reports, Ministry of Steel, Press Releases 3

Robust Demand

• Demand supported by

growing robust domestic market

• Infrastructure, Oil & Gas, and Automotive will drive

the growth of the industry

Competitive advantage

• India is among the top producers of all forms of steel

in the world

• Availability of highly educated

manpower and presence of

abundant mineral resources make India competitive in the

global context

Increasing Investments

• Foreign investment of nearly

USD40 billion committed in the steel sector in 2010

• Steel producers have signed 222 MoUs with state govts

for capacity addition of

about 276 MT by 2020

Policy support

• 100% Foreign Direct investment (FDI) through the

automatic route is allowed in

the sector

• Large infrastructure projects in

Public-Private Partnership (PPP) mode are being formed

2009

Market Size:

USD 33 billion

2014E

Market Size:

USD 83 billion

Advantage

India

2014E – Estimated figure for the year 2014; these estimates are from Data monitor

Advantage India

References: RNCOS Report, Media Reports, Ministry of Steel, Press Releases

4

*Revenue as on March 2012 **83.71% promoter shareholding

OIL & GAS

2,109 MMBOE reserves

39 MMTPA refining capacity

1,400 retail outlets

POWER

450 MT coal reserves

1,600 MW operational capacity

Growing to 4,500 MW by end of

2012 and 9,670 MW by 2014

SHIPPING 28 ships. 8 new ships on order

13 rigs incl. 1 semisubmersible

Fleet of 5,000 chartered trucks

BPO 55,000+ Aegis employees

50+ locations

REAL ESTATE

Portfolio of approx. 16 mn sq. ft.

in residential, commercial and

mixed use projects

TELECOM SERVICES GSM services in Kenya with 3

mn subscribers

1,200 branded retail outlets

under The MobileStore in India

PROJECTS Value-engineered EPC Solutions

Specialized Equipment &

Fabrication Facility

PORTS** 88 MTPA operational capacity

70 MTPA under construction

158 MTPA total capacity

CONCESSIONS US$ 300 million road concession

from NHAI

Aims to create a US$ 4 billion

portfolio in the next 2-3 years

MINING 2 bn tonnes of iron ore reserves

27 MTPA pellet plants

210 MT coal reserves

METALS 14 MMTPA steel-making

capacity

5 MMTPA processing and

distribution capacity

375+ branded retail outlets under

Essar Hypermart

Energy Steel Infrastructure Services

3,067 employees 9,161 employees 3,505 employees 61,108 employees

US$ 19.45 bn revenue* US$ 6.24 bn revenue* US$ 2.37 bn revenue* US$ 1.89 bn revenue*

76% 100% 100% 100%

*Aggregate figure eliminates inter group transactions of $ 2.6bn for Mar ‘12

Essar Group – Conglomerate at a Glance

5

1: 6 mtpa plant to be commissioned in FY’12 and balance 6 mtpa in FY’13

2: 4.1 mtpa plant to be commissioned in FY’13, and balance 2.9 mtpa in FY’14

10 mtpa steelmaking capacity

at Hazira, Gujarat

Iron Making

– 1.7 mtpa Blast Furnace

– 6.8 mtpa DRI (6

modules)

– 1.7 mtpa Corex (2 units)

Steel Making

– 10 mtpa (with both DC

EAF & CONARC)

4 mtpa steelmaking

capacity at Algoma, N

Ontario, Canada (Blast

Furnace)

130 Mn tonnes of iron ore

resources

60 Mn tonnes coking coal

reserve

20 mtpa Beneficiation and

Pelletization capacity

– 8mtpa in Vizag

– 12mtpa1 in Paradeep

2 Bn tonnes of iron ore

resources in Minnesota,

USA

150 Mn tonnes of coal

reserves in USA

7 mtpa2 pellet plant in

Minnesota, USA

Extensive flat steel range:

– Hot Strip Mill (3.6 mtpa)

– CSP (3.5 mtpa)

– Cold rolled (1.8 mtpa)

– Galvanized (1.0 mtpa)

– Color coated (0.4 mtpa)

– Plate (1.5 mtpa)

– Pipe (0.6 mtpa)

Flat steel product range:

– Hot rolled (3.3 mtpa)

– Cold rolled (0.3 mtpa)

– Plate (0.5 mtpa)

Flat steel product range in

Indonesia

– Cold Rolled (0.4 mtpa)

– Galvanized (0.15 mtpa)

● Distinct distribution model

– OEM & export sales

– 4 mtpa across 7

service centers

– Over 375 retail outlets

1 mtpa international

service center capacity

– Indonesia

– UK

– UAE

– Vietnam (Project)

Ind

ia

No

rth

Am

eri

ca

RO

W

Resources Technology Product

Essar Steel: Operations Overview

Essar Steel

Reach

6

7

Essar Steel: Hazira Facilities

8

Operations span full value chain from raw materials to product distribution

Beneficiation & Pelletization Steel Production Distribution

Captive pellet

production at Vizag

facility and Orissa

pellet project

Full range of flat rolled products,

including value-added products such as

HRPO, Cold Rolled, Galvanized. Color

Coated, Plate and Pipe

Distinct distribution model

consisting of Processing and

Distribution Centers and

network of Retail Outlets under

the Hypermart brand

Hot Rolled

(10.4 mtpa)

Cold Rolled

(2.5 mtpa)

Galvanized

(1.15mtpa)

Color

Coated

(0.4mtpa) Gas

Pellet/Sinter

Coke making Plates

(2.0mtpa)

Pipes

(0.6mtpa)

Processing &

Distribution

Centers

(5 mtpa)

End C

usto

mers

Iron-

Making

Steel-

Making

(14mtpa)

Slab

Iron Ore

Coal

Resources

Iron Ore & coal resources,

in addition to long term supply

contracts for raw materials to

facilities in India & Canada

Hypermarts

End to End Vertical Integration

Capturing value through the chain

9

Steel Industry Demands from IT

• A mix and match of planning strategies -

• Make to-order

• Make-to-stock

• Planning without final assembly

More than one planning strategy

• Customized products with a choice of multiple characteristics (~30 per each product) with increased complexity and specific Customer requirements

Complex Product Variants

• Planning generally is at a short notice

• Continuous re-assessment of products and processes Flexibility demanded in planning

• Coping with highly demanding customer segments like Automotive, Line Pipe and Construction.

Specific Customer Service requirements

• Complex Production scheduling with a constant need to optimize production through a combination of continuous and batch processes.

Complex Production scheduling

10

Business Challenges – Why VC

• Highly individualized Metallurgical knowledge & expertise leading to risk of higher overheads.

Individualized Metallurgical Knowledge

• Huge number of SKUs with the increased complexity and specific Customer requirements.

Complex SKUs

• Every Country has Bureau of Standards which release Steel grade Standards – equivalence to internal production standards remains a challenge (IS / BS / DIN / JIS / AFNOR / SAE / ASTM / AISI are some examples of mapped Standards)

Mapping Country Specific Steel Standards / Grades

• Very high human intervention – especially in the conditions of re-work / re-processing (at production, quality decision, rework scheduling, re-qualification)

Human Interventions

• Analytics become difficult to pin point and react to the upcoming enquiries in a proper manner (e.g. analytics to understand the product success in a required thickness)

Ever Changing Analytics

11

V_HRCF

321 Characteristics

HR COIL

Pre condition &Procedures

Dependencies

PreconditionSelection ConditionProceduresActionsConstraints

Standard ProfileQuality ProfileService Centre

ProfileStock Profile

Pricing conditionBase Price

Dim Ex PriceGrd Ex PriceMarket ExtraProcess Extra

Material BOMHRCFHRCWSLBNWSLBW

Task ListPacking RollingCastingMelting

Procedures & Constraint

Net

Selection Condition & procedures

Selection Condition & Procedures

HSM

Caster 1

CSP

HR Coil

Caster 2

Super BOM / Routing

Slabs

7 Products, 1400+ characteristics

(combinations of grade, chemistry,

dimensions, tolerances and processing

instructions For HR Coil

Tailor product to the Customer needs –

VC Concepts and Functionalities

12

• Defines all kind of products (Finished goods, WIP…)

• VC helped the Sales person to put together specifications for the Product and

ensure that the product can be produced from defined specifications

• Product structure in VC represented the entire hierarchy and flow of

production for all products forms

• Considered all possible process path used for planning (alternative) and

manufacturing FG product

• Quality profile helped R&D and Quality Assurance to manage Customer’s new

requirements – made for the first time products.

• Scalable model which reduced implementation time for new product buildup,

acquisition, brown field and green field project.

SAP-VC Features

13

• Drastically reduced master data maintenance on a regular basis (reduced

from “90000” FG/WIP to “90”)

• Expert knowledge incorporated into the system to the extent possible

• Standardization of processes and objectivity of decision making subsequently less training (Standard VC setup with derived technical inferences)

• Order booking used to be a manual process with multiple documents and at least three departments involved. The process is now extremely simple and can be completed in 15 minutes max having known customer needs clearly.

Change Proposed

• Change in the manner in which products are represented in SAP.

• Generic material codes and a set of variant characteristics (specifications)

• Conversion of customer specification into manufacturing instructions

Value Proposition

Challenges

PPC is not reqd to create masters

daily!

Production process mapping thru

BoM and Routing is not required

to be done as a routine.

Knowledge has been systemized

with necessary inference criteria,

validations and constraints which

are prompted while entering the

order.

Mfg instructions are passed on to

L-II systems in a seamless

manner.

Value Added…Product Definition

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• Very significant time was invested in development of the Variant Configurator.

• Removal of many non-value adding activities and documentation

• Quicker response to Customers & Inquiry processing, thus reducing overall cycle time

• Simplified and standardized process

Change Proposed

• SAP automatically determines whether requested product by the Customer can be produced or not (Since capability matrix is mapped in SAP using Variant Configuration)

• QA/QC and PPC are involved in Inquiry stage only for those products outside the capability matrix

Value Proposition

Challenges

• Acceptance of new business practice – was accepted after seeing benefits

• Documentation of capability and its translation in Variant Configuration –was a challenge as knowledge was scattered across approx. 20+ people

• Training on maintenance of Dependencies and Variant Configuration

TDC is now a set of system

parameters assigned to a product

and a sales order as per

Customer’s requirement.

These parameters are as per Plant

Capability and are flowing to Level

II systems for manufacturing

activities through respective

scheduling systems. There is no

manual entry.

Knowledge Bank for Technical

Product definition – Systemized to

the maximum possible extent

(Order booking is possible without

involving QA/QC, PPC directly

unless it is a new product

requirement)

Value Added…Technical Delivery Conditions

15

• Increased visibility of due date and production status across the entire production chain, available in one core system

• Real time update of plan based on actual production and inventory level

• Making SAP the core production order creation system ensures authentic data, such as sales order, inventory status etc. which are readily available to the planner

Change Proposed

• Order clubbing at melt plan preparation and slit production order preparation is done in SAP.

• Scheduling is done in MES system on the basis of input and out put product characteristics as required by individual processes as guided by VC.

Value Proposition

Challenges

• User acceptance of the changes in practice and user interfaces

HRC Planning Dashboard has

been developed to cater to the

operational scheduling need of

150 MT heat combinations across

the Order book. Order clubbing

has been a MAJOR achievement

with smaller quantity orders

booked in the system.

Slit Planning Dashboard has been

developed to complete the flow on

the FG side of order clubbing to

cater to HSM needs for higher

productivity through slit

combinations.

Value Added…Planning Simplified

16

• Structured pricing derivative from pricing masters inclusive of productivity,

additives, testing extras

• Significant reduction in efforts to process Sales Orders

• Use of Batch Valuation & Sales Order Cost Estimate for characteristics based

costing & inventory valuation

• Improved transparency and Control in Planning, Production and Quality due

to single data source (All systems integrated to SAP)

• Faster Quality Inspection (overall 15+ people from Quality department were

deployed for value added jobs / analytics)

Result recording through interfaces

Auto-Usage Decisions for acceptable limits pre-defined in VC

Feature to copy results in case of multiple samples

Value Added - contd…

17

Template for Roll outs, Merger / Acquisitions

• Upon carving out of Essar Steel Solution template, repeat roll outs have

become possible in a compressed time frame with equal robustness and

scalability due to -

Clearly laid down methodology while integrating the new landscape

with the existing one

Common product definition templates, data collection formats,

calculation schemas, configuration frameworks, unified numbering

schema and standardized testing methods

Visibility and estimation made available at the speed required to merge

the new Company at process level granularity

Unified processes in sales, production and quality areas are with

interfacing strategies using object oriented technology

Global consolidation in terms of reporting becomes possible from SAP

– BI/BO due to the single client strategy

Consistent Quality of solution with a template approach.

18

Suggestions…

• Involvement of Metallurgists – Major contributors in development of

VC

• Be careful – every mistake can prove “dear”

• R&D efforts need to be considered to be taken up for development

as new product configuration can be time consuming

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Q&A

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