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Benefits of ERP for Steel Industry

A whopping 1413 million metric tonnes (mmt) of crude steel has been produced in the world in 2010. The steel industry enjoys terrific growth due to raising infrastructure development projects across the globe. Along with the increasing demand, the operational and maintenance expenses have also increased over the past two decades due to instability in dollar value, shortage of skilled manpower and increasing cost of raw materials. As a result, major steel corporations are shifting their plants in lower cost regions which are also nearer to growth markets and have started refocusing on improved scheduling and optimizing manufacturing execution.

Another important method adopted by steel corporations is implementation of ERP solutions. ERP enables companies to integrate their supply chain, provide robust and future-proof backbone systems, increase information transparency and improve productivity through better sales and procurement handling. Other major benefits of ERP include the following.

[1] Multiple Planning Strategies

Steel production often requires a combination of production planning strategies. Flat or strip products would follow ‘made-to-order’; long sheets and bars are made-to-stock. Costing for made-to-stock happens based on standard approaches but for made-to-order, costing happens based on the nature of the order and material requirements. Such complexities in planning strategies and costing can be handled by ERP solutions in the most efficient manner.

[2] Product variations

Over the decades, steel grades have improved consistently. Most commonly used steel rods and bars were made of plain steel during the mid 20th century. Then came ribbed bars and in 21st century, thermo-mechanically treated bars providing utmost strength and stability. Change of grades essentially means change in raw material configuration. An ERP system helps the floor manager to automatically design the components based on the order and helps handle the processes from the sales order to the finished goods.

[3] Business Forecasts

To cater to high-demanding customers in automotive, construction and heavy equipment sectors, tight integration of electronic orders, market trends and business forecasts are the typical requirements. ERP can be very useful for business integration, trend analysis and predictive modelling of requirements.

[4] Variable Production Processes

Steel manufacturing involves batch processing, continuous processing and a combination of both. For example, both the blast furnace and the convertor work in batches, the caster works continuously for individual units and the finishing lines work in batches again. Batch selection is done by analysing order requirements, characteristic inheritance and shipment planning. ERP systems supports such variations in the production processes through automatic batch selection based on order, raw material forecasts and production scheduling based on shipment due.

[5] Integrated IT Model

One of the major benefits of ERP implementation in a steel plant is that, it offers an integrated IT model which supports all processes from raw material handling to order shipments through effective data sharing and parallel processing. ERP systems have evolved a lot during the 21st century and are able to integrate and handle machine controls systems, process controls, inventory management, production schedules, forecasting, reporting, human resources management, shipment planning etc. On-premise or on-demand ERP solutions offering robustness and cost efficiency can be chosen based on the specific requirements of the steel corporation.

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