22 American Metal Market May 2015 www.amm.com

OPTIMIZING BEHAVIOR

G iven the highly competitive na-ture of the metals industry it is not surprising that companies throughout the supply chain are

increasingly interested in optimizing their pro-duction processes and are turning to various data solutions providers to help them do so.

There is no doubt that process optimization means different things to different people. In fact, it goes by several different names, includ-ing process optimization, process productivity, overall process efficiency or overall equipment efficiency (OEE).

But no matter what term is used it comes down to the idea that companies throughout the metals supply chain not only want to have the most reliable processes in place, but they also want to be able be able to control and continuously improve those processes, Stefan Koch, the metals industry lead for the industry business unit of SAP SE, Walldorf, Germany, said.

Generally the benefit of optimizing process-es is calculated by comparing how much cost a company puts into a process and how much revenue it gets out from it, Lance Fountaine , an industry principal for the metals and min-ing unit of OSIsoft, San Leandro, Calif., said.

The high cost of doing business and the cy-clical nature of metals industry, as well as the problems that could be associated with mill downtime, are making many companies in the industry increasingly aware of the benefits of employing optimization strategies, Livia Wi-ley, a product manager with Schneider Elec-tric, Palatine, Ill., said.

“While obviously the more that you can get out of an asset the more money you can make, it isn’t just about improving production anymore. More, it is about increasing your ef-ficiency and your productivity,” she said, add-ing that involves more than just getting more out of the door faster. There are other efficien-cies that help companies drive down operating costs.

Energy savings is a huge benefit of opti-mizing processes, as is the reduction of the raw materials be used, in-process or finished product inventories being held and even the amount of scrap metal being generated.

“The objective isn’t to make everything per-fect all at once,” Fountaine said, but rather to get a good start and to improve from there. “You have to realize that this is a journey and that the most difficult thing is just getting started.”

Despite the benefits that could reaped, Uri Tenzer, global metals account manager for London-based Greycon Ltd., said that in

the past the metals sector has lagged behind certain other industrial sectors as far as their investment in technologies to optimize their production systems, although in recent years that has started to change.

Koch attributed this to the fact that previ-ously with their demand outstripping produc-tion, metals companies felt less of a need to focus as strongly upon customer service as they do today. But with increases in the re-quired speed of doing business that has been changing.

Increased globalization of the industry has also played into this. Tenzer observed that in the past metals companies had more flexibil-ity to set their sales prices at a level to ensure profitability. But in today’s business climate, where it is conditions in China as well as the United States and Europe that determine mar-ket prices, if companies want to increase, or even just maintain, their profit margins they have to reduce their costs.

“That is where the importance of process optimization lies,” Tenzer pointed out. “If a company wants to reduce their costs they need to optimize processes. It could be their supply chain processes, their production process, their operations processes or their sales processes. Companies need to streamline all of their busi-ness processes if they want to make money.”

Another important thing, according to Joe McMullen, another product marketing man-ager at Schneider Electric, is to optimize pro-cesses in real time. “While most companies have realized the value of process optimiza-tion, some companies are being more progres-sive in doing this while others have up to this point just taken baby steps,” he said. But even after just taking the first few steps to optimize their operations they can realize tremendous benefits and as they do so they are encouraged to increase their optimization efforts.

McMullen estimated that to date about 75 percent of metals facilities have basic process control strategies in place. “These basic con-trol strategies, however, are just not adequate enough to achieve maximum performance as this is a complex process including a number of nonlinear relationships,” he said. “Compa-nies need to implement advanced process con-trols that allow them to drive their processes to operate closer to certain constraint levels but still allow them to reach the qualities that they want to achieve.”

At first companies often install certain “home grown” solutions, such as a basic en-terprise resource planning (ERP) system that allows them to see real time inventories, book-ings, costs and more, according to SAP’s Koch.

The high cost of doing business and the cyclical nature of metals industry, as well as the problems that could be associated with mill downtime, are making many companies in the industry increasingly aware of the benefits of employing a variety of optimization strategies.

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May 2015 American Metal Market 23www.amm.com

OPTIMIZING BEHAVIOR

Just the implementation of an ERP system can be considered a form of process implementa-tion, he maintained, as it allows companies to standardize their processes to bring costs and increase their production speed.

Many companies, however, are looking to further optimize their processes. Koch said that in some instances that involves optimiz-ing certain supply chain processes to ensure that they sell the right products to the right customers at the right time.

He said it is this and the optimization of internal manufacturing processes that are the most important for companies to improve to ensure that they have a good handle upon their costs, where they should or should not spend money and why. “In today’s business world it is important for companies to stay ahead of the crowd or else other companies will overtake them,” he said, adding that hav-ing optimized processes in place helps them to maintain the needed competitive edge.

How companies choose to optimize their operations varies. “What is involved with the integration process depends upon what already exists,” Schneider Electric’s McMul-len said. It also varies if a company has simi-lar processes companywide or, as often is the case–especially in companies that have en-gaged in substantial merger and acquisition activities–processes are dissimilar facility by facility.

This may or may not be a problem depend-ing on what the company wants to accom-plish, Wiley said. “In most cases I don’t think that companies are looking to standardize their processes across all of their assets,” she said. “They might upgrade processes (and pro-

cess control technologies) when new assets are bought (or constructed), but for the most part I don’t think they want to necessarily stan-dardize all the sites that they own.”

Koch said that when companies do decide to upgrade their processes companywide they could choose to do so either in a full scope or a phased-in approach.

He explained that a company, especially a smaller company, could optimize one process at a time across the company, perhaps first concentrating on its finance and/or account-ing systems and then moving on to certain procurement-related processes before turning their attention to their core production and distribution processes.

Meanwhile other companies, especially larger companies, opt for a more phased-in approach. This, Wiley said, could involve starting making changes at one of its plants, making it a prototype that it could later roll out to other operations. That way the com-pany’s management can figure out what they want to accomplish and what works best to optimize their operations.

No matter the approach, OSIsoft’s Foun-taine said, as the more optimized, therefore the more efficient a company’s processes are, the more profitable the company is likely to be. He said that by eliminating, or at least lessening, the waste in their production pro-cesses, companies are likely to have the best

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24 American Metal Market May 2015 www.amm.com

OPTIMIZING BEHAVIOR

possible output levels based on their needed inputs (raw materials, water, energy, etc.). There are, of course, certain exceptions given that certain uncontrollable factors, such as en-ergy prices, raw materials costs and logistics or labor rates can sometimes be too high of a burden for a company to be able to maintain a competitive position on the cost curve.

While it is common to think about this mainly for upstream, or commodity-based, companies, Fountaine said this also applies to the value-added, downstream side of the sup-ply chain as well.

In fact, Tenzer said Greycon’s focus is upon downstream operations with solutions, such as X-Trim, that could have the end result of giving their service cen-ter customers greater negotiation power with their mills sup-plier by giving them the ability to buy the optimal number and sizes of coils that they could then slit into sheet lengths accord-ing to their customers’ specifications.

In addition to reduc-ing service centers’ raw material costs and low-ering the cost of them carrying large semi-finished and finished goods inventories, Ten-zer estimated that on average they could gen-erate 0.4 to 0.7 percent less scrap. “While that might not seem like a lot, just a 0.5 percent decrease in scrap gen-eration could mean as much as a 15 percent increase in the service center’s annual profits,” Tenzer said.

One of the keys to achieving such benefits is the use of data technologies to help met-als companies achieve the benefits that they are looking for, especially in providing com-panies with real-time data to support their attempts at optimization. Whether it is Grey-con’s X-Trim, Schneider Electric’s SimSci dy-namic simulator, SAP’s SAP HANA technol-ogy database platform, OSIsoft’s PI System data infrastructure or others, these solutions help metals companies to generate, organize and consume such data in a way that they could come up with ways to improve their operations.

“Optimization isn’t just about reducing cost and going faster,” SAP’s Koch said. “It is about being smart in using information technology to create value.”

This, McMullen said, involves bringing in variables from different points in their plant or plants and running them through a modeling software application to determine what is the best way to alter their operations to maximize the efficiencies of their processes.

“You can’t manage what you can’t measure and just by measuring key performance indi-cators to drive continuous improvement you can get an average of 1-3 percent improve-ment per year,” and that rate of improvement will never end, according to Fountaine.

“While their focus could change over time, companies will never stop looking to improve the performance of their operations. That’s why we call continuous improvement a pro-cess,” he said.

McMullen agreed. “I don’t think the opera-tional pressures, the pricing pressures and the competition from global operations are going to end anytime soon, so metals companies will continue to be under constant pressure to be as efficient as possible, to be as safe as possible and to have as low emissions as possible. All those forces will continue,” he said, adding that because of this metals companies will have to adapt more technologies to remain competitive.

Meanwhile the technologies available to them will continue to improve as well, includ-

ing advances in “big data” and more advanced analytics, Koch maintained, noting that al-ready the ability for companies to access op-timizing solutions with such mobile devices as smart phones and tablets has helped process optimization to gain traction.

It will only evolve over time, especially as the new generation–Gen Y and Millennials–climb up the managerial ladder, as they have grown up with the internet and mobile devices and will not only accept the advent of new tech-nologies, but will expect them to become part of their companies’ future, Jay Jordan, Grey-con’s North American regional manager, said.

Koch agreed, predicting that in the future all the data that can currently be consumed using

only a desktop com-puter will shortly also be able to be accessed via mobile technologies and through the Cloud. That, he said, will al-low companies to bring down costs further and to optimize both their sales and production activities. Salesmen will be able to log in from different locations into the Cloud giving them the availability to data previously only avail-able at their plants through their mobile devices as they meet with their customers.

And at the same time, Greycon’s Tenzer said, executives will be able to optimize their production from wher-ever they are on the go

and directly connect to the machines on the shop floor 24/7 and the feedback from what you do will also be immediate.

“For years companies have talked about the value of business intelligence throughout the supply chain,” OSIsoft’s Fountaine said, predicting that it will be further integrated to also include operational intelligence as well resulting in further optimization of processes throughout the operation. “There is no reason to think that we can’t get there. Already in the past five to 10 years the evolution of data ca-pabilities and analytics has come a long way. That evolution will continue to accelerate as companies learn to take advantage of new data-driven technologies.”MYRA PINKHAM

SAP SE, based in Walldorf, Germany, provides solutions such as its Mobile Maintenance.