BUSINESS ADMINISTRATION Vol. 2, No. 14, 2013:1779-1790
COST REDUCTION IN STEEL‐MAKING THROUGH THE APPLICATION OF
SCHEDULING USING DECISION SUPPORT SYSTEM
Krisna Putra and Mursyid Hasan Basri School of Business and Management Institut Teknologi Bandung, Indonesia krisna.putra@sbm‐itb.ac.idAbstract— Basic metal industries, which include steel industry, are very sensitive to raw material costs. As a result, volatility and rate of increase in raw material costs have a significant impact on the sustainability of the steel industry. To offset the margin pressure due to the current problem, the company should focus on improving operational efficiency by running various programs in order to reduce operating costs and improve the quality of the output. As a complement to these steps, this paper will specifically introduce the Decision Support System (DSS) to solve production scheduling issue in steelmaking operations. The purpose of the scheduling are to reduce the waiting time between the processes in the steel making as well as to increase the yield, which in turn can be used to reduce the cost of production. The simple loading heuristics with forward and backward loading will be used to solve scheduling problems.The basic idea of the proposed system is to treat Continuous Casting Machine (CCM) process as a capacity‐constrained resource. On this approach, CCM treated as a determinant of the production rate to entire system. Time scheduling in the steelmaking operation have high complexity due to the strict requirements and uncertainties. The design solution using the DSS is intended also to anticipate when the assumptions fail or not fulfilled, so that manual intervention is needed to bridge the gap in making a feasible schedule.DSS would have an important role in daily operation of steel making to reduce cost. This role will become a vital role in the future, in line with the use of hot metal from the Blast Furnace to Electric Arc Furnace (EAF), since arrival of hot metal would occur periodically in a certain time interval. Keywords: Steel making, Scheduling, Theory of Constraints, Decision Support System 1. Introduction Starting in 2010, the recovery of steel demand in the world market is still far from the expectations, which resulted steelmakers have to try hard to manage their business as a result from the fluctuating demand (Ernst & Young, 2010). However, while most of the global steel industry continued to feel pressure from the recessionary trends of 2009, steel demand and related production in the domestic market continues to be key drivers in the growth of PT Krakatau Steel, despite pressure from steel prices in global markets greatly affect the performance of the company. Therefore, to keep the company in order to remain competitive, the strategy should be formulated and selected in order to maintain business continuity and future growth. Strategies adopted by steelmakers generally include improvement of operational efficiencies.
2. Business Issue Exploration
At the end of 2010, Ernst & Young stated that "The fluctuation in demand, as well as raw material price volatility are the two biggest challenges facing steelmakers" (2010, p. 34). Until now, the issues remain major challenges for the steel manufacturer, because steel prices generally respond more slowly than the cost of production, which eventually resulted in the reduction of margin or losses.
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Putra and Basri / The Indonesian Journal of Business Administration, Vol.2, No.14, 2013:1779‐1790 4) Yield and Quality
Yield and quality is the manifestation of an initiative that focuses on improving the output of the process. Improving the yield is meant to use fewer resources, require less energy and processing facility to obtain more finish product for the same unit cost. Yield improvement covers the complete process chain within the steel making, from preparation of raw material up to finished products handling. Yields are especially important also from the cost standpoint. This is because, whilst the scrap steel can generally be recycled, all the labor and energy costs associated with processing the wasted steel volumes are lost and the value added is not achieved.
Quality is a continuous process where action is taken to increase effectiveness and efficiency of the process. In line with yield, maintaining quality products covering the whole process chain from inspection of raw material up to delivering of finish product to ensure customer expectations. Improving the quality of output also reduces costs by reducing rework and scrap levels.
5) Plant Utilization
Plant utilization usually is referring to the rate a plant is producing compared to what the plant actually could produce. In general, the degree of plant‐capacity utilization has effects on overall costs. If conditions permit, it is more desired the high utilization rate to obtain lower production cost. In some trustworthy journals, experts say that global steel production capacity utilization is predicted to remain below 80% (Ernst & Young, 2011, p. 32). Volatility in demand for steel products is making managing capacity utilization something of a balancing act. In such conditions, the steel makers are very careful not to get too much production or keep capacity utilization in low level, because of excess supply will pose a risk to the recovery in steel prices, especially if there is no demand to match production. In fact, up to a certain level the decision to cease production was the best option and worth to consider.
6) Technology
Since 40 years, the development of iron and steel technology has dramatically influenced the way steel is made, the quality and variety of products produced. The presence of mini mills is one of the proofs of the technological developments that have changed the basic structure of the industry. This technology development will continue in line with the growing competitive forces and market globalization.
The presence of the technology should be coupled also with the knowledge of the steelmaking process, an understanding of the raw materials and finish products. A better understanding and control of the manufacturing process of steel making will help reduce inefficiencies in every stage of processes. Implementation of technological developments in Krakatau Steel, covers three main areas, namely equipment, operating techniques and/or practices as well as modeling and control algorithm.
B. Method of Data Collection and Analysis
External factors such as the imbalance of supply and demands in the steel market, volatility of raw material costs and energy costs are the problems that must be faced by all of the steel industry. At Krakatau Steel, with the majority of the raw materials imported from abroad as well as energy supply is erratic, these external factors cause multiple effects on plant operations management that ultimately affect business performance. Especially in the area of steel making, the difficulties encountered in the management of operations reflected in the annual average of achievement for importance performance indicators in steel making plant.
As a complement, the time utilization indicates number of issues that exist in the operation of the steel‐making process, which in turn increases the cost of production and erode the competitiveness of company. The major issues that need particular attention are as follows: - Lack of order - Scarcity of raw materials and energy - Long waiting time between operations (Low speed operation) Utilization time table describes the actual operating conditions of the production process as well as provides important information to be processed further. In this case, the decrease in production is also reflected in the decline in the time utilization, i.e. 59.78% in SSP‐1 and 71.09% in the SSP‐2 for
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imensions o duling opera ty of opera nology. In do ating charact steel making h; limitation essed are ha cted in the ut urrent opera m the data co umption can wing figures: μT‐T = 135 μspecEn = 6 urrent opera rring to the p data show a rdance with loss will be the following μLF‐time = 6 μLF‐energy = Temperat urrent opera casting proc ainer that is d Basri / The I viously, the s tallurgy (LF a ss flow as sh ow, each batc in parallel. process, so n for paralle the number ch batch is p in the ladle nal restrictio f the machin tions in stee ations, includ oing schedul teristics that process can s of electric andled at hig tilization tim ting charact ollected, the n be summa 5 minute and 635.27 kwh/t ting charact practice of o a wide variat its function greater follo g figures: 63.8 minute = 46.34 kwh/ ture decreas ting charact ess begins b located on t Indonesian Jour steel making nd RH) and c hown in figur Figure ch can be fre However, us there is a d l operations of batch ope preferred. Fo furnace to m ons for castin ne, liquid stee el making is a ding transpo ing batch op t must be co n occur at a cal energy a gh temperat me as shown i eristics at EA e frequency d arized as fo d σT‐T = 22.12 t and σspecEn = eristics at LF operation, no tion in the
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E. Sc Sched real‐t resch sched ideal occur The s − − Lim − − − Putra an cope of Solut duling on rea time events heduling stra dule repair, a fit for DSS. W rs. The event scopes of the − Scheduling This proces that the re liquid stee allocation o preliminary − Optimizatio Optimizatio to avoid dis and time o mitations in − The seque Manufactu − The main s − Transport t d Basri / The I tion al‐time syste (Ouelhadj & ategies. Gene and complete With the hyb t is usually co e proposed m the sequenc ss should be esulting sche l. Based on of batches fo y start and fi on on must be sruption of s f all the batc this DSS are nces of the ring Executio cope are sta times include Indonesian Jour Figur em as propo & Petrovic, erally, there e reschedulin brid system, r onsidered a b modeling on t ce. determined dule is feasib the planned or the all sta nish dates. performed t sequence cas ches as well a as follows: batches are on System (M ges of the pr e in static tab rnal of Business re 13. Heuristi sed needs to 2009, p. 41 are two op ng. On the is rescheduling batch arrival, the DSS are a the start an ble with resp d start dates ages of the p to maintain c sting. The res as informatio e available f MES) rocess in CCM ble of proces s Administration ic algorithms o address tw 19). The firs ptions that c ssue of when g is done per , change of c as follows: nd end dates pect to the u s of the seq process, inclu continuity fo sults of this s on about the rom high‐lev M and LF/RH ssing time in n, Vol.2, No.14, wo issues: ho st issue con can be select n to reschedu iodically and casting speed s as well as c upstream fac uence, the a uding the pr or continuou step are adju expected ar vel planning each stages. , 2013:1779‐17 ow and when ncerns the d ted as need ule, hybrid sy d also when a d, delay etc. casting speed cilities and a algorithm m oduction seq s casters. It ustment of ca rrival of a bat , which is p . 790 n to react to definition of ed, which is ystem are an an exception d such a way vailability of ust produce quences and is necessary asting speed tch. performed in o f s n n y f e d y d n
4 F. Co Expec ">=4" − − Assum can b − − − − In thi time rate f CCM equiv As 4 can − − − − In thi time incre value G. Im DSS o mont budg partie budg do no 4. Conclusio onclusion cted results "), with the f − μLF‐time[s<4] − μLF‐time[s>=4 mption I or p be recovered − single casti − 2 sequence − 3 sequence − Target distr • 4 seque • 5 seque is case, the d below 77 m from the pre with a value valent to the ssumption II n be recovere − single casti − 2 sequence − 3 sequence − Target distr • 4 seque • 5 seque is case, the d under 115 ase of seque e is equivalen
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overall imple th. Given the et necessary es, it would et refers to ot include ha on and Imple calculated following res = 77 min an 4] = 58 min, σ pessimistic va in accordan ng: 80 % (28 e : 45% (456 e : 5% (55 he ribution of se ence : 90% (7 ence : 10% (7 determinatio inutes or μLF evious 2.92 t e of 95.84% addition of S or optimistic ed without p ng: 90 % (31 e : 90% (912 e : 25% (274 ribution of se ence : 80% (1 ence : 20% (3 determinatio minutes or ence rate fro nt with increa
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ementation e DSS would
y to build th require cost the Bappena rdware and ementation P by classifyin ults: nd σ LF‐time[s<4] σ LF‐time[s>=4] = 2 alues obtain ce with the f 80 heats from heats from 1 ats from 109 equence cast 712 heats) 79 heats) on of 60% is F‐time[s<4]. The o 3.15. With or an increa SSP2 yield by c values obta enalty of ene 15 heats from heats from 1 heats from 1 equence cast 1201 heats) 300 heats) on of 75% is μLF‐time[s<4] pl
om the prev asing of 0.81 igure 14. LF‐ti is planned in be applied u he solution. t of IDR 1,80 as. Given the system com Plan ng LF‐time d = 38 min, 29 min ed with the following com m 350 heats) 1013 heats) 95 heats) ting, s obtained fr result obtain h interpolatio se of 0.52% y 0.46% or co ained with th ergy in accor m 350 heats) 1013 heats) 1095 heats) ting, s obtained fr us σ LF‐time[s<4 vious 2.92 to 1% in SSP yiel ime distributio n 7 months using existing However, in 04,612,500. e DSS would ponent. data into 2 g premise of 6 mposition: ) rom the "bat ned with ass on data acco with energy ost reduction he premise o rdance with t ) rom the "bat 4]. The result o 3.67 and n ld or cost red on with ‘sequ with schedu g systems w n the case o Consultant applied usin groups of se 60% of the ca tch number" umption I is rding to figu y penalty 5.2 n of $ 2.37 pe of 75% of the the following tch number" t obtained w no power or
duction of $ 4 ence < 4’ uled Go‐Live ith internal r of application rate used in ng existing sy equence rat asting seque " in LF with a an increase re xxx, the r 0 kwh/ton. T er ton of pro e casting sequ g compositio " in LF with a with assump electricity p 4.80 per ton
at the end resources, so n developm n the prepar ystems, then e ("<4" and ence below 4 a processing of sequence esult is yield This result is oduct. uence below on: a processing ption II is an penalty. This of product.
of the sixth o there is no ent by third ration of the n the budget d 4 g e d s w g n s h o d e t
Putra and Basri / The Indonesian Journal of Business Administration, Vol.2, No.14, 2013:1779‐1790 H. Recommendation
As mentioned, the process parameters were recorded in several stages showed a fairly wide variation. These issues in some cases will provide its own difficulties to the scheduling algorithm, and quite possibly scheduling cannot find a feasible solution. Therefore, to obtain optimum results some operating practices that correlated with process time must be improved so that solutions offered will be maximized. Solutions offered can be further developed to obtain better results by applying a more comprehensive scheduling algorithms were consider energy constraints in EAF. So that energy consumption can be reduced as low as possible. DSS would have a vital role in the future in line with the use of hot metal from the Blast Furnace to EAF, since arrival of hot metal as a partial substitution of raw materials would occur periodically in a certain time interval. Hence the concept of pull systems needs attention, to improve throughput as well as lower the costs (Heizer & Render, 2011, p. 656). References Accenture. (2012). Three Steps for Sustainable Cost Reduction. AGI ‐ Goldratt Institute. (2009). The Theory of Constraints and its Thinking Processes. Connecticut: AGI ‐ Goldratt Institute. Association, W. S. (n.d.). Steel Statistical Yearbook archive. Retrieved from http://www.worldsteel.org Committe on Economic Studies. (2011). Steel Statistical Yearbook 2011. Brussels: World Steel Association (worldsteel). Committee on Economic Studies, IISI. (2001). Steel Statistical Yearbook 2001. Brussels: International Iron and Steel Institute. Edwin Basson. (2012). Global economic outlook and steel demand trends. Barclay's Capital Global Resources Conference. World Steel Association. Ernst & Young. (2010). Global Steel ‐ 2010 Trends, 2011 Outlook. Ernst & Young. (2011). Global Steel ‐ 2011 Trends, 2012 Outlook. Ernst & Young. (2013). Global Steel 2013. Frederick S, H., & Lieberman, G. J. (2001). Introduction To Operation Research. McGraw‐Hill. Heizer, J., & Render, B. (2011). Operations Management, tenth edition. Pearson. Horch, A. (2010). Production Optimization: Handling Complexity. ABB Corporate Research Germany. Jacobs, F. R., & Chase, R. B. (2011). Operations And Supply Chain Management (Thirteenth Edition). McGraw‐Hill. McKay, K. N., & Wiers, V. C. (2006). The Human Factor in Planning And Scheduling. In J. W. Herrmann, Handbook of Production Scheduling (pp. 23‐57). Springer. Ouelhadj, D., & Petrovic, S. (2009). A survey of dynamic scheduling in manufacturing systems. Journal of Scheduling 12 , 417–431. Simchi‐Levi, K. S.‐L. (2008). Designing and Managing the Supply Chain: Consepts, Strategies and Case Studies (Third Edition). McGraw‐Hill.