SAP Variant Essar A perfect symphony of Metallurgy & Information Technology. Suneel Aradhye Sr VP and CIO Essar Steel India Ltd - PDF

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SAP Variant 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
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SAP Variant 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 Indian Steel Industry & Indian Economy 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 Entry of International companies 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 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 References: RNCOS Report, Media Reports, Ministry of Steel, Press Releases 3 Advantage India Robust Demand Demand supported by growing robust domestic market Infrastructure, Oil & Gas, and Automotive will drive the growth of the industry 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 E Market Size: USD 83 billion Advantage India 2009 Market Size: USD 33 billion 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 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 References: RNCOS Report, Media Reports, Ministry of Steel, Press Releases 2014E Estimated figure for the year 2014; these estimates are from Data monitor 4 Essar Group Conglomerate at a Glance 76% 100% 100% 100% Energy Steel Infrastructure Services OIL & GAS 2,109 MMBOE reserves 39 MMTPA refining capacity 1,400 retail outlets MINING 2 bn tonnes of iron ore reserves 27 MTPA pellet plants 210 MT coal reserves PROJECTS Value-engineered EPC Solutions Specialized Equipment & Fabrication Facility SHIPPING 28 ships. 8 new ships on order 13 rigs incl. 1 semisubmersible Fleet of 5,000 chartered trucks 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 METALS 14 MMTPA steel-making capacity 5 MMTPA processing and distribution capacity 375+ branded retail outlets under Essar Hypermart *Revenue as on March 2012 **83.71% promoter shareholding *Aggregate figure eliminates inter group transactions of $ 2.6bn for Mar 12 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 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 3,067 employees 9,161 employees 3,505 employees 61,108 employees US$ bn revenue* US$ 6.24 bn revenue* US$ 2.37 bn revenue* US$ 1.89 bn revenue* 5 ROW North America India Essar Steel: Operations Overview Essar Steel Resources Technology Product Reach 130 Mn tonnes of iron ore resources 60 Mn tonnes coking coal reserve 20 mtpa Beneficiation and Pelletization capacity 8mtpa in Vizag 12mtpa 1 in Paradeep 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) 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) Distinct distribution model OEM & export sales 4 mtpa across 7 service centers Over 375 retail outlets 2 Bn tonnes of iron ore resources in Minnesota, USA 150 Mn tonnes of coal reserves in USA 7 mtpa 2 pellet plant in Minnesota, USA 4 mtpa steelmaking capacity at Algoma, N Ontario, Canada (Blast Furnace) 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) 1 mtpa international service center capacity Indonesia UK UAE Vietnam (Project) 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 6 Essar Steel: Hazira Facilities 7 8 End Customers Capturing value through the chain End to End Vertical Integration Gas Hot Rolled (10.4 mtpa) Cold Rolled (2.5 mtpa) Galvanized (1.15mtpa) Color Coated (0.4mtpa) Processing & Distribution Centers (5 mtpa) Iron Ore Coal Pellet/Sinter Iron- Making Steel- Making (14mtpa) Slab Hypermarts Coke making Plates (2.0mtpa) Pipes (0.6mtpa) Resources Iron Ore & coal resources, in addition to long term supply contracts for raw materials to facilities in India & Canada 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 Operations span full value chain from raw materials to product distribution 9 Steel Industry Demands from IT More than one planning strategy Complex Product Variants A mix and match of planning strategies - Make to-order Make-to-stock Planning without final assembly Customized products with a choice of multiple characteristics (~30 per each product) with increased complexity and specific Customer requirements Flexibility demanded in planning Planning generally is at a short notice Continuous re-assessment of products and processes Specific Customer Service requirements Coping with highly demanding customer segments like Automotive, Line Pipe and Construction. Complex Production scheduling Complex Production scheduling with a constant need to optimize production through a combination of continuous and batch processes. 10 Business Challenges Why VC Individualized Metallurgical Knowledge Highly individualized Metallurgical knowledge & expertise leading to risk of higher overheads. Complex SKUs Huge number of SKUs with the increased complexity and specific Customer requirements. Mapping Country Specific Steel Standards / Grades Human Interventions 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) Very high human intervention especially in the conditions of re-work / re-processing (at production, quality decision, rework scheduling, re-qualification) Ever Changing Analytics 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) 11 Tailor product to the Customer needs VC Concepts and Functionalities Pre condition &Procedures 321 Characteristics For HR Coil 7 Products, characteristics (combinations of grade, chemistry, dimensions, tolerances and processing instructions Super BOM / Routing HR Coil HSM CSP V_HRCF HR COIL Caster 1 Slabs Caster 2 Dependencies Precondition Selection Condition Procedures Actions Constraints Standard Profile Quality Profile Service Centre Profile Stock Profile Procedures & Constraint Net Pricing condition Base Price Dim Ex Price Grd Ex Price Market Extra Process Extra Material BOM HRCF HRCW SLBNW SLBW Selection Condition & procedures Task List Packing Rolling Casting Melting Selection Condition & Procedures 12 SAP-VC Features 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. 13 Value Added Product Definition 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 Drastically reduced master data maintenance on a regular basis (reduced from 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. 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. Challenges Very significant time was invested in development of the Variant Configurator. 14 Value Added Technical Delivery Conditions 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 Removal of many non-value adding activities and documentation Quicker response to Customers & Inquiry processing, thus reducing overall cycle time Simplified and standardized process 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) 15 Value Added Planning Simplified 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 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 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. Challenges User acceptance of the changes in practice and user interfaces 16 Value Added - contd 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 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 19 Q&A 20
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