The document discusses how companies throughout the metals supply chain are increasingly interested in optimizing their production processes to improve efficiency and reduce costs. It describes different approaches to process optimization, including implementing systems to monitor real-time data, standardizing some processes while customizing others to individual facilities, and focusing on continuous incremental improvements rather than trying to perfect all processes at once. The benefits of optimization include increased productivity, energy savings, lower raw material and inventory costs, and reduced scrap. While optimization has lagged in some metals sectors, investments in technologies and strategies to streamline processes have grown in recent years due to competitive pressures to cut costs.

1. 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.
Thecreative
process

2. 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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3. 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.