Logistics management and cost reduction

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Logistics management and cost reduction in steel plants

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Logistics management and cost reduction

  1. 1. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/1 Logistics Management and Cost Reduction In Steel Plants Prepared By : Nasser Mohamed Zaky Logistics Senoir Manager – Ezzsteel – Suez - Egypt E-mial: Nasserzaky@yahoo.com Tel: 00201006054604 Supervisor : Dr. Mohamed Elmaadawy “This thesis for fulfillment of master degree in international logistics”
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  4. 4. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/4 Introduction Logistics Management System (LMS) has recently gained a great deal of attention. LMS is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements [1]. Logistics activities are divided into two main activities, key activities and supporting activities. Key activities are customer service, inventory management, transportation, and information technology. Supporting activities are warehousing, packaging, purchasing, material handling …etc. LMS is being mandated to all fields for both tangible and intangible products, as well as light and heavy industries. Steel factories always give most of the efforts to production side either quality or quantity and give less efforts to manage the handling of by-products which are produced forcedly during manufacturing of the final product. Even these efforts are directed to metallic items since it is recycled and ignore others in spite of all By-Products are valuable if it is properly managed. These By –Products either can be recycled in the same plant or can be sold to a different customers. This inefficient reaction leads to increase the cost of production by the percentage of these losses during materials handling and production processes. Problem started from random handling of materials and generated by-products i.e. without using designed system showing the life of each item since inception to demise. Then accumulation of generated by-products which make the solution after some years more costly and mixing of different by-products together maximizes the problem. Material handling and by-products warehouse are playing an essential role to organize and control all by-products to be either recycled in the steel plant or to be sold to other customers. The objective of this research is to study the impact of logistics management in cost reduction in steel plants.
  5. 5. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/5 CHAPTER 1 Steel Making Supply Chain Logistics 1.1- General information about steel: 1.1.1 What is Steel? Steel is an alloy of iron and carbon containing less than 2% carbon and 1% manganese and small amounts of silicon, phosphorus, sulfur and oxygen. Steel is the most important engineering and construction material in the world. It is used in every aspect of our lives, from automotive manufacture to construction products, from steel toecaps for protective footwear to refrigerators and washing machines and from cargo ships to the finest scalpel for hospital surgery [2]. 1.1.2 Steel Inventor A British inventor called Henry Bessemer is generally credited with the invention of steel in 1856. He founded the Bessemer Steel Company in Sheffield, England, but up to 1859 the company made a loss. By the time the patent ran out in 1870 he had made more than 1 million pounds sterling. Steel is still produced using technology based upon the Bessemer Process of blowing air through molten pig iron to oxidize the material and separate impurities [2]. •
  6. 6. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/6 1.1.3 Steel Making: Steel is made via two basic routes: from raw materials - iron ore, limestone and coke - by the blast furnace and basic oxygen furnace route; or from scrap via the electric arc furnace (EAF) method. The raw material approach is known as the integrated route and about 60% of steel produced today is made by this method. The second technique is much easier and faster since it only requires scrap steel. Recycled steel is introduced into a furnace and re-melted along with some other additions to produce the end product. About 34% of steel produced in 2003 was produced via the EAF route [2]. Figure 1.1: Illustrate two basic routes of steel making [3]
  7. 7. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/7 1.1.4 Flat Steel Product A flat steel product is a plate product or a (hot or cold) rolled strip product. Typically steel is rolled between sets of rollers to produce the final thickness. Plate products vary in dimensions from 10 mm to 200 mm and thin flat rolled products from 1 mm to 10 mm. Plate products are used for ship building, construction, large diameter welded pipes and boiler applications. Thin flat products find end use applications in automotive body panels, domestic 'white goods' products, thin cans' and whole host of other products from office furniture to heart pacemakers [2]. 1.1.5 Long Steel Product A long product is a rod, a bar or a section - typical rod products are the reinforcing rods for concrete, engineering products, gears, tools etc. are typical of bar products and sections are the large rolled steel joists (RSJ) that are used in building construction projects. Wire-drawn products and seamless pipes are also part of the long products group [2]. 1.1.6 Mini-Mill A mini-mill is a molten-steel-producing process that feeds scrap steel into an electric arc furnace to re-process the material into finished steel for new applications. (See 1.1.3) [2]. 1.1.7 Steel Worldwide Production Steel is indispensable to our modern way of life and essential to economic growth. In 2007, 1.3 billion tones of steel were produced and production levels are expected to double by 2050 to meet the growing demand for steel around the world.[3]. 1.1.8 The Most Steel Makers China produced more than 400 million tons of crude steel, making it the first country to exceed 400 million tons of crude steel in a year [4].
  8. 8. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/8 1.1.9 Steel Recycling Of the 960 million tons of steel produced in 2003, more than 60% of it was produced from recycled steel. Steel is the world's most recycled material; indeed one of the two major steel production techniques uses exclusively 100% recycled steel. The additional good news is that the properties of steel remain unchanged no matter how many times the steel is recycled. The steel in your car body might have been a panel from a washing machine in a previous life and even that panel might have been a drink can! In 2001 in North America more than 14.5 millions cars were recycled which is 27 cars per minute! In the United Kingdom 2.5 million refrigerators are replaced annually. In 2002 in South Africa, 64% of all beverage cans were recycled. The country consumes about 3 billion cans annually [2]. Table:1.1: Illustrate amount of recycled steel worldwide -million metric ton [3] Recycled steel consumption Recycled steel consumption Apparent domestic supply EU-27 115.6 117.8 Other Europe 25.3 10.9 CIS 50 58.2 NAFTA 81.3 96.1 Central/South America 14.3 14.4 Asia 189.2 172.8 World 481.9 478.9 1.1.10 Different Types of Steel Grades Steel is not a single product. There are currently more than 3,500 different grades of steel with many different properties - physical, chemical, environmental - 75% of which have been developed in the last 20 years. If the Eiffel Tower were to be rebuilt today the engineers would only need one-third of the amount of steel, modern cars have new steels with higher strength reducing the overall shell weight by 25% [2].
  9. 9. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/9 1.2. The Meaning of Supply Chain Management 1.2.1 Supply Chain Management (CLM, CSCMP) Definition Council of Logistics Management (CLM) and Council of Supply Chain Management professional (CSCMP) defined supply chain management as the following: Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it is also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third – part service providers and customers, in essence, Supply Chain Management integrates supply and demand management within and across companies [1]. 1.2.2 Steel Industry Supply Chain members and flows: The supply chain consists of all parties involved, directly or indirectly, in fulfilling a cus- tomer request. The supply chain includes not only the manufacturer and suppliers, but also transporters, warehouses, retailers, and even customers themselves within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and fulfilling a customer request. These functions include, but are not limited to, new product development, marketing, operations, distribution, finance, and customer service. The supply chain is dynamic and involves the constant flow of information, product, and funds between different stages [5]. Steel supply chain either make to stock production mode or make to order production mode based on the type of steel product either long or flat steel since the application of long steel is common and commercial but application of flat steel is specific, next section will have an explanation about both modes :
  10. 10. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/10 1.2.2.1 Make to stock production mode: The meaning of this mode is shown below through explanation of its impact in following points: Inventory policies: Inventory planning depend on forecasting of demand and market needs with keeping of buffer stock to secure uncertainty in the demand or supply which provides a well-designed replenishment policy for restocking with optimizing of productivity, also we can keep speculative stock in case of boom expectations, risk of market needs changes is less than other mode, this mode applicable in case of long steel as an example since the customer needs are defined in advance and most likely are the same. Economies of scale: This mode allows steel makers to gain the benefits of economies of scale, as an example produce same steel grade for certain period which keep high productivity and consequently reduce the cost of production. Material Management (Inbound Logistics): Material management based on this mode are dealing with the same material and may changes only due to looking for better quality or better price, this way lead to reduce the safety stock of special alloys since all materials are known in advance and nothing connected with customer requests. Supply Chain Members: This mode included all supply chain members i.e. supplier, manufacturer, distributor, retailer and consumer since steel plant is difficult to deal directly with end consumer because this way isn’t applicable due to a high number of customers with a small customer needs which lead to increase the transportation costs and interrupt internal logistics activities, Figure 1.2 illustrates a schematic of steel supply chain parties.
  11. 11. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/11 Figure 1.2, Illustrate steel supply chain – make to stock production mode S upplier M anufacturer Distributer Retailer Consumer 1.2.2.2 Make to order production mode: The meaning of this mode is shown below through explanation of its impact in following points: Inventory policies: This mode leads to unplanned Inventory which leads to a long lead time since production processes start after receive the orders from the customers. steelmaking processes have some constraints that generate unplanned stock, customer needs are varies and may has a change in some parameters from order to another such as width, thickness, chemical composition and mechanical probabilities, in case of the steel plant takes a risk and produce randomly, this situation will lead to have a stock is waiting a customer who will come after a long time or not come and then sell this stock with less price to generate cash, this mode applicable in case of flat steel as an example. DemandSupply + Cash Flow
  12. 12. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/12 Economies of scale: This mode does not allow steel makers to gain the benefits of economies of scale, as an example steel production are going in batches every day and change steel grade from batch to another leads to a waste in time and materials which leads to reduce productivity and consequently increase the cost of production. Material Management (Inbound Logistics): Material management are conservative by keeping higher safety stocks of some materials such as special alloys which are urgent needed to produce certain orders and even the quality of scrap must be better than other mode and sponge iron must be a part of charge mix to satisfy customer needs. Supply Chain Members: This mode included supplier, manufacturer, distributor and consumer and does not include retailers since supply chain starts after the consumer sends his order and the role of the distributor is to collect a small orders from a different consumers and issue one big order to the manufacturer which gives him a better price negotiation either for transportation or steel price itself and consequently it helps the manufacturer to have a consistent production. Figure 1.3, Illustrate steel supply chain – make to order production mode S u p p lie r M a n u fa c tu r e r D is tr ib u te r C o n s u m e r DemandSupply + Cash Flow
  13. 13. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/13 1.2.3 The Objective of Supply Chain Management The objective of every supply chain should be to maximize the overall value generated. The value is generated by the supply chain through the difference between what the final product is worth to the customer and the costs the supply chain incurs in fulfilling the customer's request. For most commercial supply chains, value will be strongly correlated with the supply chain profitability (also known as supply chain surplus), the difference between the revenue generated from the customer and the overall cost across the supply chain [5]. 1.2.4 The importance of Supply Chain Management Supply chain design, planning, and operation decisions play a significant role in the success or failure of a firm.
  14. 14. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/14 1.3 Logistics Management 1.3.1 The Meaning of Logistics Management CLM has defined Logistics Management as the following: Is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements, note that this definition includes inbound, outbound, internal, and external movements, and return of materials for an environmental purposes. [1]. Is the process of planning, implementing, and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption for the purpose of meeting of the customer requirements [1]. 1.3.2 The Importance of Logistics Management Logistics is the one important function in business today. No marketing, manufacturing or project execution can be succeeding without logistics support. Logistics is comparatively a new term, but not the operation. Logistics has existed since the beginning of the civilization. Raw material and finished products are always moved from point to another in a small scale. Things began to change with the advance in transportation. Population began to move from rural to urban areas and to business centers. No longer did people live near to the production centers, nor did production take place near residence centers. The geographical distance between the production point and consumption point increased.
  15. 15. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/15 . Another factor has come into play recently. Since the early 1990's, the business scene has changed. The globalization, the free market and the competition has required that the customer gets the right material, at the right time, at the right point and in the right condition… at the lowest cost. Logistics is about creating values – values for customers and suppliers of the organization, and value for the organization’s stakeholders. Value in logistics is expressed in terms of time and place. Products and services have no value unless they are in the possession of the customers when (time) where (place) they wish to consume them. Logistics has become and increasingly important value adding process for a number of reasons: 1. Costs are significant. 2. Supply and distribution line are lengthening. 3. Logistics is important to strategy. 4. Logistics adds significant customer value. 5. Customers increasingly want quick and customized response.
  16. 16. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/16 1.3.3 Logistics Activities Logistics activities to be managed vary from organization to another depend on the structure of each organization, management’s honest differences of opinion about what constitutes logistics and the importance of individual activities to its operations. According to the CLM the components of a typical logistics system are customer service, demand forecasting, distribution communications, inventory control, material handling, order processing, parts and service support, plant and warehouse site selection (location analysis), purchasing, packaging, return goods handling, salvage and scrap disposal, traffic and transportation, and warehousing and storage. The logistics components are usually divided into key and supporting activities, along with some of decisions associated with each activity. From this research view point material handling considered as a one of the key activities in a steel plant which must be managed under logistics organizations to achieve logistics objectives. 1.3.3.1 The Key Activities 1- Customer Service Standards Customer wants and needs. Customer response to service. Setting customer level[6] 2- Transportation. Mode and transport service selection. Freight consolidation. Carrier routing.
  17. 17. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/17 Vehicle scheduling. Equipment selection. Claims processing. Rate auditing [6] 3- Inventory Management: Raw material and finished goods stocking policies. Short- term sales forecasting. Product mix at stocking points. Number, size and location of stocking points. Just in time, push and pull strategies [6] 4 -Material Handling: Determine inputs and outputs. Order-picking procedures. Equipment selection. Equipment replacement policies. Stock storage and retrieval [6]. 5- Information flows and order processing: Sales order- inventory interface procedures. Order information transmittal methods. Ordering rules. [6].
  18. 18. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/18 1.3.3.2 The Support Activities 1- Warehousing: Space determination. Stock layout and dock design. Warehouse configuration. Stock placement [6]. 2- Purchasing: Purchasing policies. Supply source selection. Purchase timing. Purchase quantities [6]. 3- Protective packaging design Handling. Storage. Protection from loss and damage [6]. 4- Cooperation with production and operations: Specifications of aggregate quantities. Sequence and time production output [6].
  19. 19. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/19 5- Information maintenance: Information collection, storage, and manipulation. Data analysis. Control procedures [6]. 6- Other activities: After – sales parts and services support. Maintenance functions. Return goods handling. Recycling operations [6]. What ties all of these activities or functions together is their ability to impact customer satisfaction. Top management should utilize logistics as a way to integrate these activities and keep them focused on the customer rather than on the internal processes. By integrating these activities into a customer focused logistics system, the organization can develop a sustainable advantage that is very difficult for a competitor to imitate.
  20. 20. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/20 1.3.4 Material handling in steel plant 1.3.4.1 Material handling definition Material handling is a manual or mechanical carrying, moving, delivering or working with something, handling of raw material, spare parts and generated by-products to its place in time safely. 1.3.4.2 Material handling is a key activity in the steel plants Material handling considered as a supporting activity in the most of logistics organizations in different fields but in the steel making it is a key activity due to the following: 1. It is an essential part of steel making process which include: Discharging of incoming raw materials, consumables, spare parts, lubricants in its location and moving whatever to be stored in covered warehouses. Feeding production units with their requirements from warehouse in time. Segregation of scarp in scarp yards from nonconductive materials, tanks, explosives and impurities. Cutting of over size scarp to suitable sizes for Electric Arc Furnaces (EAF). Moving of all usable scrap to charging locations in a quantity and a quality needed to guarantee a continuous operation and to avoid production interruption. Moving of unusable scrap to certain location to have a further processes and to separate the valuable metals such as nickel, copper, aluminum …etc, and transport sand and concrete to the outdoor areas. Moving of all generated home scrap 24hrs/7 days to the preparation areas to avoid plant interruption and to start immediately cutting processes which
  21. 21. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/21 optimize cash flow since using of these home scrap as an input again will reduce payments of buying a new scrap. Moving of prepared home scrap after checking of their sizes and quality to charging locations. Empty areas, silos and boxes of generated by-products in the indoor areas 24hrs/7 days. Classifying of generated by-products in the indoor areas through putting of each type separately to avoid mixing since separation is adding value for each by-product and facilitates recycling or selling to other plants. 2. Delay in material handling process such as delaying in evacuating of generated home scrap or other by-products like slag from under the furnaces will lead to production interruption. 3. Mistakes during segregation of scrap such as passing of gas cylinders lead to explosions in the furnaces and may lead to a big disaster for the whole steel plant.
  22. 22. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/22 1.3.5 By-Products Warehouse 1.3.5.1 By-Products warehouse definition By-Products warehouse is a place, manpower and system organize and control receiving, storing and issuing of wasted or scraped items either from production units or from other warehouses. 1.3.5.2 By-Products Warehouse Purpose Control and Organize all wasted items in a way environmentally accepted. 1.3.5.3 The role of By-Products warehouse As we have raw material warehouse to organize and control the receiving of items from purchasing and issue of items to production units we must have a By-Product warehouse to organize and control the opposite i.e. receiving of wasted items from production units and issue of sold items to the customers based on coordination with material handling , sales and financial department. 1.3.5.4 By-Products Warehouse Functions Receive all generated by-products through material handling section such as expired materials from all warehouses, foreign materials of incoming scrap, scales, slag, fine lime, used parts incoming from maintenance, wood, drums , used Oils…etc. and record all these items in data base. Make coordination with all plant units concerning the wasted items. Issue reports showing stocks and sold quantities.. Make control of by-products locations to avoid throwing of wasted items every where, specially the small items which affected the shape of the plant. Make coordination with sales department and provide them with all the required data. Join the invited customers from sales department inside the plant during their visits to show them the By- products.
  23. 23. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/23 Follow up loading of By-Products from the plant. Issue all the required warehouse documents concerning sold By-Products. Control issue of sold items according to payment notes which received from financial department. Provide financial department with the documents and reports to control the customer's accounts. 1.3.5.5 By-Products Warehouse Documents Bin card for each item in a software. Scrap sheet. Weighbridge ticket. Adding voucher Issuing Voucher. By-products status report. 1.3.5.6 By-Products Warehouse Importance and Benefits By-Products warehouse is essential in any factory since the entire new items have life cycle and at the end it must become scrap. As new items can become obsolete due to new developments or expired due to a shelf life. Also during production process we always have by-products. All these items have value either by recycling in the same factory or in other plants and to be used as a raw materials which in total make utilization of all resources in a way environmentally accepted which resulted in a high efficiency and high effectiveness.. By-Products warehouse is playing an essential role in organizing and controlling of all these items until recycled in the same plant or sold to other customers.
  24. 24. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/24 1.4 Difference between Logistics Management and Supply Chain Management The following comes from the Council of Logistics Management Definitions (Cut and pasted from their website): : The Definition of logistics management is that part of the Supply Chain Management process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer requirements . These are the boundaries and relationships of Logistics Management adopted by the Council of Logistics Management: "Logistics Management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management of third party logistics services providers. To varying degrees, the logistics function also includes sourcing, procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution -- strategic, operational and tactical. Logistics Management is an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance and information technology. . The Definition of Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. .
  25. 25. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/25 These are the boundaries and relationships of Supply Chain Management adopted by the Council of Logistics Management: "Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing [7] Table 1.2, Supply Chain Management Logistics Management Plan to Manage the resources Plan to manage the flow of material, information and cash Sources Material Management (Inbound Logistics) Make Manufacturing Logistics Support Delivery Physical Distribution (outbound Logistics) Return Reverse Logistics Table 1.2 summarized the differences between supply chain and logistics which can be explained as the following: Supply chain management is concerned with creating a plan to manage the whole resources that go towards meeting customer demand for goods or services. Also selection of suppliers that will deliver the materials and services the company needs to create its product (goods or services). In additional to the whole processes to make the product including manufacturing steps, testing, packaging, and preparation for delivery and coordinate the receipt of orders form customers. Then develop a network of warehouses, pick carriers and setup an invoicing system to receive payments and create a network for receiving of the defective and excess products back from customer. Supply chain build the design of all drivers which are facility, inventory, transportation, information, sourcing and pricing and link them with other entities in the pipe line i.e.
  26. 26. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/26 suppliers, customers, and all stakeholders within the concept of “the whole is greater than the sum of its parts”. Logistics are concerned with creating a single plan to manage the flow of material, information and cash of the organization. Also the flow of inbound logistics to feed the plant with the required material through materials management. In additional to support manufacturing processes through transportation, material handling and information. Then outbound logistics to deliver the products to the customer and finally organize the return of those products in case they are is not satisfied the customer, the whole processes of logistics are running around order fulfillment.
  27. 27. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/27 1.5 International Steel Plants Treatment of By-Products To see where we are from others a brief will be given about how international companies are dealing with such by-products, an example considered ArcelorMittal for slag handling and utilization. 1.5.1 ArcelorMittal Profile ArcelorMittal is the world's number one steel company, with 310,000 employees in more than 60 countries. It has led the consolidation of the world steel industry and today ranks as the only truly global steelmaker. ArcelorMittal is the leader in all major global markets, including automotive, construction, household appliances and packaging. The group leads in R&D and technology, holds sizeable captive supplies of raw materials and operates extensive distribution networks. Its industrial presence in Europe, Asia, Africa and America gives the group exposure to all the key steel markets, from emerging to mature. ArcelorMittal will be looking to develop positions in the high-growth Chinese and Indian markets [8] 1.5.2 Recycling of slag as an example During my visit to Cloose S.A. slag processing plant in Luxembourg 19 – 21 September 2007 ,I found they built integrated plant specially for processing of slag which produce slag with different specific specification matching to the application filed ,the process flow as follows: Raw slag comes from the steel plants. Slag pass through metal recovery unit to separate the included steel parts. Slag crasher to crush slag to certain size. Crushed slag pass through several sieves to get the exact size for slag aggregates.
  28. 28. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/28 Handling and stored then sold to recycle in a different applications since they are using slag in roads, rivers, cement companies as a raw material. These plants are not producing slag only but also separating steel metals which are used as raw materials for steel plants which utilize the whole quantity [9]. Below Figures # 1.4, 1.5& 1.6 are some photographs shows slag processing plant and its applications. Figure 1.4, photograph shows slag metal separation unit which used for processing slag and separating metal.
  29. 29. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/29 Figure 1.5, a) photograph shows different sizes made from slag that meets different applications fields, b) photographs shows application of slag for the road construction. a) b)
  30. 30. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/30 Figure 1.6, a) Photograph shows application of slag for protecting the reveres beaches; b) photograph shows application of slag as building material. b) a)
  31. 31. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/31 CHAPTER 2 Research Case Study 2.1 Research Problem Description: In this chapter the situation in some steel factories will be introduced since they always give most of the efforts to production side either quality or quantity and give less efforts to manage the handling of By-Products which are produced forcedly during manufacturing of the final product. These efforts are directed to the metallic items which to be recycled in a steel plant and ignore others in spite of all By-Products are valuable if it is properly managed. These By-Products either can be recycled in the same plant or can be sold to different customers. This inefficient reaction leads to increase the cost of production by the percentage of these losses during materials handling and production processes. Problem started from the random handling of materials and generated By-Products i.e. without using designed system showing the life of each item since inception to demise. Then accumulation of generated by-products which make the solution after some years more costly and mixing of different by-products together maximizes the problem. Below the summary of the problem and figures 2.1, 2.2, 2.3, 2.4&2.5 are some photographs showing the situation in some steel plants: Damaging of materials and sometimes losing a part of bulk materials during handling. Losing of around 2.3% of foreign materials and scrap dust from consumed scrap. This percentage calculated based on the historical data of three years (see table 2.1 - scrap consumption in the research case study). Value of this percentage in one year equal 37million L.E in case of an average scrap price per ton is 2200L.E which leads to increase the production cost.
  32. 32. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/32 Losing of around 1.3% of steel with slag generated from production processes. This percentage calculated based on experimental studies. Value of this percentage in a one year equal to 6 million L.E in case of an average scrap price per ton is 2200L.E which added to production cost. Holding of home scrap for long time without preparation which means losing a part of cash flow and increase the production cost by the interest of a new finance. Accumulation of a different solid By-Products, scrap spare parts and consumables which also increase the total costs by the storage costs and double or triple handling of these By-Products. Occupied wide yards which affected negatively on the movement and organizing of the other logistics activities. Continuing of this problem without solution make solution more difficult and more costly. Material handling and by-products warehouse are playing an essential role in avoiding damages or losses of materials or By-Products during handling steps, separating, recycling and help in selling of all these foreign materials and generated By-Products which leads to cost reduction if they are properly managed. 2.2 Research Problem Illustration: The research problem will be clarified through some photographs illustrated in Figures 2.1,2.2,2.3,2.4&2.5 which clearly show the accumulation and mixing of some By-Products together which maximize the problem and make the solution more difficulty and costly in spite of these By-Products are valuable if they are managed in a proper way.
  33. 33. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/33 a) b) c) d)
  34. 34. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/34 a) b) c) d)
  35. 35. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/35 a) b) c) d)
  36. 36. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/36 a) b)
  37. 37. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/37 The previously illustrated figures clearly shown the existence of the problem in some steel plants and hence in this research we shall focus on the role of material handling and by-products warehouse through application of designed system in organizing the flow of incoming materials, recycling and selling of all generated by-products which lead to smooth operation, improve efficiency and finally production cost reduction. a) b)
  38. 38. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/38 2.3. Material Handling System Design, Implementation and Results 2.3.1 System Design: 2.3.1.1 Collection of Information: To establish and design system we have to collect information about production inputs and outputs in the steel plant including generated By-Products. In case of a new plant and we need to initiate system for material handling and By- Products warehouse we have to use the plant operation manuals as a reference but in case of operated plant we have to use actual figures from plant records as we made in this research since we collected the actual information. In Table 2.1 & 2.2 the final numbers are shown since there are a lot of details such as consumption rate per ton or generation rate of By-Products based on each ton produced. This information used also to make a traffic calculation in the internal roads, since a traffic jamming was found in some gates and weighbridges which led to delay during material and By-Products handling, so modifications were done to have smooth movements. In the next section the collected information about materials and By-Products flows based on an actual situation of plant produced Hot Rolled Coils – Flat Steel with capacity of 900.000mt/year and lime plant with capacity of 100,000mt/year of quick lime.
  39. 39. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/39 2.3.1.2 Raw Materials Handling Flow: Table 2.1 shows the raw materials handling flow which includes the following information: ِ ◌Column #1 shows the index of used materials which later will be used as a code of Materials handling procedures. Column #2 shows the description of materials categories which are used in the steel plant. Columns # 3, 4&5 show the consumed quantity in a daily, monthly and annually basis which calculated from consumption rate multiplying by the number of days and production quantity. Column #6 shows the movement of that material will be from where to where, this will help the system designer to know the steps of handling and link that with the traffic circulation to see is there are a traffic jamming anywhere to avoid delays during handling of these items to storage areas or from storage areas to production units, the aim is to have efficient and effective handling system which must guarantee a smooth operation. Column # 7 shows truck capacity from each item which will be used to calculate the next column to have the number of trucks incoming each month by dividing the consumption per month on the truck capacity.
  40. 40. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/40 Raw Materials Handling Flows.12Table 1 2 3 4 5 6 7 8 9 Index # Description Consumption (ton) Handling From-To Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Raw Materials: Scrap : R-01 Imported Scarp 2,032 60,963 731,553 Main Gate - Open scrap yard 40 1524 Open scrap yard- Scrap bays 7 8709 R-02 Local Scrap 113 3,387 40,642 Main Gate - Open scrap yard 8 423 Open scrap yard- Scrap bays 6 564 W-01,02,03, 10,11,12& 13 Home Scrap 113 3,387 40,642 Preparation Area - Scrap bays 10 339 Sponge Iron - Direct Reduced Iron (DRI) and Hot Briquetted Iron (HBI): R-03 DRI/HBI 831 24,926 299,115 Main Gate -Storage yard 55 453 Storage yard- Hoper & Scarp bay 10 2493
  41. 41. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/41 Table 2.1 continued 1 2 3 4 5 6 7 8 9 Index # Description Consumption (ton) Handling From-To Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Carbon: R-03 Carbon Charge 50 1,500 18,000 Main Gate -Scrap bay 52 29 Carbon Foamy Slag 23 675 8,100 Main Gate – Warehouse 50 14 Carbon Ladle 1 16 196 25 1 Warehouse - Production units 6 3 Lime Stone: R-03 Lime and Dolomite 600 18,000 216,000 Main Gate - Storage yard 40 450 Alloys: R-03 Ferro-Alloys 22 668 8,010 Main Gate –Warehouse 35 19 Warehouse -Production units 6 111
  42. 42. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/42 .1 continued2Table 1 2 3 4 5 6 7 8 9 Index # Description Consumption (ton) Handling From-To Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Slag Builder: R-03 Calcined Bauxite 1 24 288 Main Gate – Warehouse 50 1 Calcium Aluminate 3 85 1,022 50 2 Warehouse -Production units 6 18 Graphite Electrode: R-04 Electric Arc and Ladle Furnaces 8 252 3,024 Main Gate-Warehouse 29 9 Warehouse -Production units 5 50 Refractories: R-04 Electric Arc Furnace, Ladles and Tundish 32 964 11,574 Main Gate-Warehouse 43 22 Warehouse -Production units 6 161 Mold Powder: R-04 Mold and Tundish 2 62 1,861 Main Gate –Warehouse 40 2
  43. 43. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/43 .1 continued2Table 1 2 3 4 5 6 7 8 9 Index # Description Consumption (ton) Handling From-To Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Other: R-05 Operative Parts (Rolls,..) 4 48 1,300 Main Gate –Warehouse 20 2 Warehouse -Production units 4 12 Spare Parts 2 18 500 Main Gate –Warehouse 15 1 Warehouse -Production units 2 9 Chemicals & Lubricants 2 20 550 Main Gate –Warehouse 10 2 3,839 114,995 1,382,377 Warehouse -Production units 6 3 15,426 Note: Yearly production = 900,000 ton Hot Rolled Coils & Lime plant capacity of 100,000 ton of Quick lime.
  44. 44. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/44 From Table 2.1 the following result are obtained: Quantities to be handled to production line in a daily basis from all items are 3,839mt Quantities to be handled to production line in a monthly basis from all items are 114,995mt. Quantities to be handled to production line in an annually basis from all items are 1,382,377mt. In front of each materials table shows the movement of each material once arrive to the plant main gate until issued for production units. Number of trucks which will be moved inside the plant to production line in a monthly basis is 15,426 trucks. Table 2.2 shows the following information: Column #1 shows the index of generated By-Products which later will be used as a code of handling procedures of those items. Column #2 shows the description of generated By-Products from different production units in the steel plant, these By-Products in the flat steel are relatively the same as the long steel. Columns # 3, 4&5 show the generated quantity in a daily, monthly and annually basis which calculated from the generation rate per metric ton of finished product multiplying by the number of days and production quantity. Column #6 shows the movement of that By-Products will be from where to where, this will help the system designer to know the steps of handling and link that with the traffic circulation to see is there are a traffic jamming anywhere to avoid delays during handling of these items to storage areas or from storage areas to production units, the aim is to have efficient and effective handling system which must guarantee smooth operation.
  45. 45. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/45 Column #7 shows truck capacity from each item which will be used to calculate the next column # 8 to have the number of trucks used each day, month or year by dividing the generation per day, month or year on the truck capacity.
  46. 46. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/46 Handling FlowsProducts-By.22Table 1 2 3 4 5 6 7 8 9 Index # Description Generation (ton) Handling from-to Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Meltshop (MS): W-01 Scrap Dust 45 1,356 16,272 Scrap Yard - Preparation Area 10 136 W-02 Ingots,Tundish and Ladle Skull 48 1,437 17,239 Meltshop - Preparation area 30 48 W-03 Slag 440 13,210 158,516 Meltshop - Disposal area 15 881 Disposal area-Local Market 50 265 W-04 Fume Dust ( Baskets & Silos) 43 1,281 15,373 Meltshop - Disposal area 10 128 W-05 Fume Dust Cooling Chamber 18 533 6,390 Meltshop - Disposal area 10 53 W-06 Broken Refractories 16 489 5,865 Meltshop - Disposal area 6 81 W-07 Broken Electrodes 0.4 13 151 Meltshop - Disposal area 3 4 W-08 Fine Quik Lime 80 2,388 28,650 Lime Plant - Local Market 8 298 Fine Lime Stone 84 2,527 30,326 Lime Plant - Outside Disposal area 8 316
  47. 47. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/47 Table 2.2 Continued 1 2 3 4 5 6 7 8 9 Index # Description Generation (ton) Handling from-to Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Thin Slab Caster (TSC): W-09 Scales 35 1,059 12,708 HSM and TSC - Disposal area 12 88 Disposal area - Local Market 60 18 W-10 Crops (Head & Tail) 28 825 9,900 HSM and TSC - Preparation area 16 52 Preparation area- Scrap bay 10 83 Hot Strip Mill (HSM): W-11 Plates 70 2,100 25,200 HSM- Preparation area 25 84 Eject Slabs Preparation area- Scrap bay 10 210 W-11 Cobbles 25 750.0 9,000 HSM- Preparation area 7 107 W-12,13 End Cut ,Sampling Station & Straps Preparation area- Scrap bays 8 94 Utilities : W-14 Skimed Oil 3 86 1,036 Production units - Disposal area 10 9 Sludge form Dewatering System 1 35 414 Production units - Disposal area 10 3 Sand from WTP Filters Production units - Disposal area
  48. 48. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/48 Table 2.2 continued 1 2 3 4 5 6 7 8 9 Index # Description Generation (ton) Handling from-to Truck capacity # Of Trucks /Month Remarks Daily Monthly Yearly Mechanical Roll Shop: W-15 Grinding Machine Much Rollshop - Disposal area one bucket 1Grinding Machine Coolant water Rollshop - Disposal area General Wastes: W-16 Wood 0.3 10 124 Production units - Disposal area 0.6 1 Indoor area-Local Market 7 1 Empty drums 0.2 10 122 Production units - Disposal area 1.5 1 Disposal area - Local Market 4 1 Scraped operative parts 4 108 1,300 Production units - Waste Warehouse 10 11 Total 941 28,217 338,586 2,974 Note: Yearly production = 900,000 ton Hot Rolled coils & Lime plant capacity of 100,000 ton of Quick lime.
  49. 49. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/49 From Table # 2.2 the following results are obtained: Quantities to be handled in a daily basis from all items are 941mt Quantities to be handled in a monthly basis from all items are 28217mt. Quantities to be handled in annually basis from all items are 338587mt. In front of each materials table shows the movement of each material once generated until issued from the plant main gate or storage in the indoor area. Number of trucks which will be moved inside the plant in monthly basis is 2,974 trucks. Digits and information collected from table 2.1&2.2 will be one of the important inputs for the system designer which will help him to have full understanding about number, description and the flow rate and movement of those materials and generated By-Products which enabled him to put a plan for designing the system. 2.3.1.3 Hold several internal review meetings: Since handling of materials and By-Products have involvements from different departments, so system designer has to hold a several meetings with all involved parties (Production, maintenance, Administration, Environment, sales, finance and safety) as well as all logistics sections. The main purpose of that review meetings are to define the responsibilities, documents needed if any, the start point, end location, the best specifications of recycled home scarp, these information help him to build an efficient and effective system during implementation. These meeting create common understanding, team work and to avoid conflict during implementation.
  50. 50. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/50 2.3.1.4 Internal Material Handling Supply Chain Design (Hidden Supply Chain): Based on the collected information given in Table 2.1& 2.2 I started to design flow chart for each category which defined clearly process, used documents and the responsibility, see as an example Figures 2.6 which shows the general material handling flow chart , Figure 2.7 which shows scrap handling flow chart, Figure 2.8 which shows scrap dust handling flow chart &Figure 2.9 which shows meltshop slag handling flow chart as follows:
  51. 51. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/51 N o O k N o O k N o Y e s N o Y e s No In te rn a l M a te ria l Ha n d lin g S u p p ly C h a in in S te e l P la n t S ta rt M a te ria l c o m in g in to g a te G iv e T ru k e n tra n c e N o . T ru k w e ig h in g w ith lo a d P re p a ra tio n G u id e T ru k to S p e c ifie d a re a U n lo a d in g /L oa d ing N e e d P re p a ra tio n T ra n s p o rtin g to B u nk e rs o r S to ra g e T ra n s p o rtin g T o P ro d u c tio n U n it W a s te T ra n s p o rtin g T o in d oo r a e ra G o o d P ro d u c tio n S to p M e ta lic T ra n s p o rtin g to P re p a ra tio n a re a W e ig h in g P re p a ra tio n S e c u rity S e c u rity S e c u rity M a te ria l H a n d lin g W e ig h b rid g e T ic k e t T ra n s p o rtin g T o o u ts id e d u m p in g a e ra In s p e c tio n W e ig h w ith o u t la o d a n d g o P la n t U n its re p re s e n ta tiv e
  52. 52. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/52 No Note: 11 12 Procedure Document Responsibility 1 - Security R-01 - [ Scrap Handling Processes ] 2 - Security 3 - Stores (weigh bridge operator) # 4 - Mobile Equipment contractor with Supervision of Material Handling team 5 - Mobile Equipment contractor with Supervision of Material Handling team 6 - Stores (weigh bridge operator) 7 - Truck Driver with supervision of securety 8 - Stores (weigh bridge operator) 9 - Security 10 - Mobile Equipment Contractor Under Supervision of Material Handling team - Metlshop Representative 13 - Melt Shop Representative - Mobile Equipment Contractor Under Supervision of Material Handling team - Metallic Inspection Committee Scrap Car Operator 14 - Mobile Equipment Contractor under supervision of Material Handling team 15 - Logistic Dpt.; Material Control & Planning18 - Mobile Equipment Contractor under supervision of Material Handling Team and operator according to Melt Shop Manager instruction. - The above procedure will be applied in the normal condition - In Emergency cases, gate have to enter any required Material in order to keep Plant running. 16 17 Truck com e into gate Give truck entrance No. Truck weighing with load Unloading into scrap yard Inspection Truck weighing without load Entrance Record: - Truck no. - Driver name - Material & Supplier W eighing Ticket: LG-W H RC 08 Vessels CheckScrap 01MH RC-LG:List Guide truck out side the plant Segregation Yes: Preparation Charging bunkers Classification Need preparation W eighing Record W eight Charging sheet Inspect if need m ore preparation Cleaning by Magnet W eighing with Dust Cleaning Dust LG-MC RC 02
  53. 53. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/53 2 - Sales Department - Financial Department No # Procedure Document Responsibility 1 - Mobile Equipment contractor with supervision of material handling team and by- products store keeper W-01 -[ Scrap Dust ] 3 - Security 4 - Stores (weigh bridge operator) 5 - Mobile Equipment contractor with Supervision of Material Handling team and by-products warehouse store keeper 6 - Stores (weigh bridge operator) - Metlshop Representative 9 - Melt Shop Representative - Metallic Inspection Committee 7 - Security 8 - Logistic Dpt.; Material Control & Planning 10 - Mobile Equipment Contractor under supervision of Material Handling team 11 14 - Mobile Equipment Contractor under supervision of Material Handling team according to Melt Shop Manager instruction. 12 - Stores (weigh bridge operator) 13 Collecting & pilling the scrap dust Give truck entrance No. Truck weighing without load Scrap Inspection Guide truck out side the plant Yes: Preparation Charging bunkers Need preparation No: Weighing Record Weight Daily Stock Situation Report Weighing Ticket: Inspect if need more Screening Loading Truck Contract Delivery Notification Figure 2.8, Scrap Dust Handling flow chart (W-01):
  54. 54. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/54 W-03 -[ Melt Shop Slag ] 4 - Security 5 - Stores (W eigh bridge Operator) 6 - Mobile Equipment Contractor under supervision of Material HandlingTeam and by-products warehouse storekeeper 7 - Stores (W eigh bridge Operator) 8 - Security 11 - Stores (W eigh bridge Operator) 13 - Mobile Equipment Contractor under supervision of Material Handling Team - Mobile Equipment Contractor Under Supervision of Material Handling Team. - Mobile Equipment Contractor Under Supervision of Material Handling Team - Logistic Dpt.; Material Control & Planning - Melt shop Representative - Mobile Equipment Contractor under supervision of Material Handling Team. - Sales Department - Financial Department 9 1 3 # Procedure Document Responsibility 12 2 10 Collecting of slag Recording the weight & updating stock Handling to scrap yard Handling to specified area Inspect separated Metal Daily Stock Situation Report Slag Screening Speerate Metal W eighing Seperated Metal W eighing Ticket: Give truck entrance No. Truck weighing without load Guide truck out Loading Truck Contract Notification Figure 2.9, Meltshop Slag Handling flow chart (W-03 )
  55. 55. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/55 2.3.1.5 Review the design: After complete the deign of these flow charts a another review must be done with all above mentioned parties and collected all their comments which to be considered during updating of that design. Repeating the review steps before and after to avoid conflict during implementation. 2.3.2 System Implementation: First step for implementation started with explanation of that design to all heads in charge in the plant. Second step is awareness for people who will apply that design. Then apply the design with continuous site tour from material handling team to monitor and explain the right way for application. Upload the system in (IMS) Integrated Management System as a material handling procedure. This system can be applied in any steel plant after some adjustment based on its steel products either long or flat.
  56. 56. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/56 2.3.3 System Results: 2.3.3.1 Revenue from sold by-products: Application of the above mentioned system illustrated in Figures 2.6,2.7, 2.8 and 2.9 for internal material handling supply chain as a example (each item mentioned in table 2.1 and 2.2 had a certain flow chart since inception to demise) leads to generate revenues from sold items. Figure 2.10 demonstrate the revenues generted from sold items and benefits which are summarized in the following: Generate revenue of 43.6 million L.E in the period from year 2005 up to year 2009 which started with 961104 L.E in year 2005 and are growing in next years until reach 14372187 L.E in 2009 based on upgrading of the system and understanding of all parties the whole processes. Save the costs of storage or dispose these by-products which included dumping area in additional to transportation and administration costs. Solve the problem of by-products completely by selling most of them to others and use them as a raw material. Evacuate plant areas first by first which improve the movement inside the plant and utilize the storage areas in other activities. Avoid the plant crises since accumulation of these by-products will lead sometimes to create a fire and disturbances. Help the surrounded society by opening a new windows of works for contractors, who they hire people and help in solving the problem of unemployment.
  57. 57. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/57 Figure 2.10 , the revenues generted from sold items and benefits 2.3.3.2 Recycled home scrap: Also application of the above mentioned system illustrated in Figures 2.6,2.7, 2.8 and 2.9 for material handling as a example (each item mentioned in table 2.1 and 2.2 had a certain procedure since inception to demise) leads to recycle home scrap in the same plant. Figure 2.11 demonstrate the recycled home scrap since year 2005 up to 2009 and benefits which are summarized in the following:
  58. 58. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/58 Recycled of 227000mt of steel metal since year 2005 which means return its value to cash flow and turn over again in the plant processes. The value of these prepared home scrap is around 500 million L.E if we consider the average scarp price is 2200 L.E. Delaying in preparing of this home scarp means a big loss since for sure the plant will need a new financial source which also means additional costs to pay interests. From technical view point these scrap are known since it was produced by the same plant and better to use them instead of buying from outside. Figure 2.11, Recycled home scrap since year 2005 up to 2009 and benefits Plant stoppage due to international economic crises
  59. 59. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/59 So both figure 2.10 & figure 2,11 confirm the following: 1- Material handling system is a key activity in the steel plants. 2- By-products warehouse is essential for any plant such as other warehouses. 3- Application of designed system for material handling will lead to production cost reduction. 2.3.3.3 Photographs of some results: Figure 2.12 clearly shows home scrap prepared and recycled in same plant and Figure 2.13 (a) shows the processed slag which used in the cement companies as a raw material and 2.13 (b) shows the metal seperated from slag which recycled in the same steel plant. Figure 2.12, home scrap prepared and make it ready to be recycled in same plant.
  60. 60. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/60 Figure 2.13, a) photograph shows processed slag which used by cement companies as a raw material, b) photgraph shows metal seperated which is ready to be recycled in same steel plant a) b)
  61. 61. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/61 CHAPTER 3 Discussions and Conclusion 3.1 Discussions The objective of this research was to study the impact of logistics management in cost reduction in the steel plants. To achieve this objective we started in chapter one by general information about steel which answer some questions about what is steel, steel inventor, steel making processes. Also flat and long steel meaning, meaning of Mini Mill, steel worldwide production. Then the most steel makers, steel recycling and finally different steel grades. This information gives understanding about steel industry. After that we presented some information about the meaning of supply chain management which included supply chain definition, steel making supply chain members and flows which either “makes to stock production mode” or “makes to order production mode”. Also the objective of supply chain management and its importance for business success. This information gives understanding about supply chain management and its role in business success. After that we presented some information about logistics management which included first the meaning of logistics management and its importance. Second the logistics activities with some details about key and support activities. Third detailed information about material handing in steel plant and by-products warehouse since mainly their impact in cost reduction will be studied in details in this research. This information gives understanding about logistics management.
  62. 62. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/62 Then we explained the difference between supply chain management and logistics management. We ended up chapter one by information and photographs about international treatment of steel plants’ By- Products. Also we explained slag processing as an example. This information gives the reader some pre-understanding of recycling processes and how international steel companies are dealing with their By- Products. In Chapter two we explained research problem and showed the losses and disturbances resulted from ignoring of clear internal material handling supply chain application and By-Products warehouse. Then we illustrated the problem by some photographs which showed clearly the existence of the problem in some steel plants. After that we explained the steps of solving the problem starting from designing of internal materials handling supply chain (hidden supply chain) which included collection of information about raw materials and By- Products flows. Also we held several internal review meetings with all involved parties. Based on collected information and results of meetings we designed the internal materials handling supply chain. Then we reviewed this design to insure smooth application and reduce errors. Then we applied the internal materials handling supply chain with support of this application from materials handling team. After that we showed the results gained from system application within five years. These results are mainly 43.6 million L.E as a revenue from sold By-Products and recycled of 227000mt of steel metal from home scrap with value of 500 million L.E in case of scrap price is 2200L.E per ton. Also we explained that the value added is not only come from the revenue generated. But also there are other benefits such as saving of
  63. 63. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/63 storage cost and interests of new finance. Some photographs shows the results are presented in the last section of chapter two. In this chapter we presented brief about the research and conclusion which shows clearly that application of internal material handling supply chain and establishing of By- Products warehouse will definitely lead to production cost reduction. 3.2 Conclusions and Recommendations From this research the following conclusions can be drawn: Understanding of the interfaces between supply chain managements is crucial to have integration between all members which is essential for business success. Design internal material handling supply chain (hidden supply chain) before application shows the processes, document and responsibility since arrival of materials to plant gate until allocate each By-Products in a specific location is the one of ways to achieve cost reduction. Understanding of materials and By-Products flows is essential to design the internal material handling supply chain. Continuous monitoring and reviewing of the applied internal material handling supply chain is essential to improve the efficiency and effectiveness of that system, since the processes are dynamic. Separating of each By-Product in certain location will facilities recycling or selling of all By-Products. By-Products warehouse is essential for any factory which organizes and controls the flow of the generated By-Products and makes an official link with other departments such as production, handling, finance, and sales.
  64. 64. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/64 Both handling section and By-Products warehouse will lead to have closed cycle for receiving By-Products from production, maintenance or other warehouses until recycle them by the same plant or sell to outside customers which lead to improve the work environment and cost reduction. Application of internal material handling supply chain leads to generate revenue of 43.6 million L.E in five years as a result of sold items to external customers. Also application of that system leads to recycle 227000mt of steel metal in five years which means return back 500 million L.E to steel plant cash flow in case of scrap price 2200L.E per ton. Cost reduction is not comes only from the value of sold or recycled By- Products but also comes from saving of storage costs and avoiding of double or triple handling of these items. Cost reduction finally achieved through return back of cash flow leakages by avoiding of materials losses and recycling or selling of the By-Products. Material handling system is a key activity in steel plants. Application of designed system for material handling and By-Products warehouse will lead to cost reduction.
  65. 65. Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky 65/65 References [1] Council of Logistics Management, http://www.clm1.org/mission.html, 12 Feb 98) Council of Supply Chain Management Professional [2] IESE Business School-University of Navarra , Mittal Steel: The making of the Worlds Largest Steel Company (A), 2006. [3] http://www.worldsteel.org/pictures/programfiles/Fact%20sheet_Raw%20materials.pdf [4] International Iron and Steel Institute, Top-30 Producers by International Iron Steel Institu5 July 2006. [5] Sunil Chopra & Peter Meindl, Supply Chain Management Strategy, Planning & Operation – Third Edition,2007. http://cyber.econ.pu.ru/downloads/alm_1_3.pdf]6[ [7] http://supplychain.ittoolbox.com/documents/logistics-vs-scm-17075 [8] ArcelorMittal web site http://www.arcelormittal.com [9] Proceedings of 5th European Slag Conference 19th – 21st September 2007, Luxembourg EUROSLAG Publication No. 4.

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