In recent years, the steel industry has seen creative solutions to long-standing challenges, emerging technologies, and niche market explorations – all of which are changing this traditionally conservative industry.
We spoke with Henri Isojärvi, Product Manager at DELMIA Quintiq with over 10 years of experience working with steel producers. Here, he talked about key trends and challenges that are shaping the industry today.
What are some of the current economic trends in the global steel industry?
Henri: Steel demand growth is slowing down, and world economic outlook is looking less favorable as we move into 2019. Tariffs placed by US have resulted in changes to the global flow of steel and increased steel imports to Europe are affecting steel companies there. Also, we see a wave of consolidation continue in Europe as companies seek to become more competitive.
What are steel producers doing to mitigate this decline in demand?
Henri: Organizations are taking action to become more than just steel producers. They are focusing on technology, customer service and exploring new or niche markets. Steel producers are looking for ways to provide aftermarket and value-added services. For example, Tata Steel has developed a mobile canning concept to cut food loss. This concept will allow farmers anywhere in the world to process and preserve their produce on site, helping to reduce food loss dramatically at source whilst generating additional revenues for farmers. In the construction industry, steel’s longevity, versatility and sustainability is leading to new applications.
Which emerging technology and innovations are driving today’s steel industry and why?
Henri: First would be a greater emphasis on sustainability. The steel industry is one of the biggest CO2-emitting sectors, accounting for around 7% of global CO2 emissions. Interestingly, sustainability is one of the key drivers of innovation. There’s a focus on lighter, stronger steels to reduce fuel consumption of vehicles. Steel producers are also looking into initiatives, from capturing CO2 emissions of blast furnaces, all the way to revolutionary projects aiming for zero carbon footprint steel-making.
Producers are becoming increasingly digitalized. They are getting better at sharing data and utilizing information across the value chain. This is beneficial, for example, in sales & operations planning. By using all relevant input information, a company can make a more reliable demand forecast, which helps in making better decisions in supply planning. In daily operations, availability of real-time data allows the company to plan production effectively, react to changes at shorter notice, and even predict energy consumption.
More and more steel producers now turn to the automotive industry for increased revenue, where it uses a VMI (vendor-managed inventory) model. What is the impact on these producers?
Henri: Managing a customer’s inventory raises the bar for operations of a steel producer. It requires reliability and consistently high-delivery performance so that stock in VMI can be maintained at the right level without resorting to excessive inventories or costly expediting actions. VMI can also require making transportation planning an integral part of the master production scheduling, so that the right products are available at the right time, not only ex-works but at the customer site.
What’s your advice for a steel producer undergoing a technological transformation in its operations?
Henri: My advice is to look at it not just as a technological transformation, but as a business transformation. Even though technology is an important enabler of the business transformation, it’s typically not enough by itself. At the same time, you need to consider people and processes.
Let’s take planning and optimization technology, for example. No matter how good its technology is, a solution alone can’t solve the company’s challenges or provide optimal results until people and processes are aligned, and the system is used the right way. Changes in mindset need to occur, people have to adopt new ways of working, and processes need to be reevaluated.
Imagine a steel producer that implements a new technology solution for order acceptance. The solution may work just fine, generating realistic delivery dates based on current order book and capacity. However, if people and processes are forgotten, you can expect some push back from the sales team. Salespeople are used to quoting static lead times to customers, and they do not see the benefits of dynamic delivery date promising. It is the supply chain that has to face the planning puzzle.
This is just one example of a transformation where technology alone will not necessarily lead to a better outcome.I think this is an area where DELMIA Quintiq can help, through our ability to configure our solution to fit an organization’s operations 100%. This allows planners to work in a way that is more aligned to what they’re used to, while also incorporating their tribal knowledge.