The steel industry encompasses both the producers that melt and form steel and the processors that add value by conditioning steel for downstream customers. As a result, trends and shifts in the steel industry significantly influence material costs for automotive, construction, consumer appliance, energy, heavy machinery, and many other sectors. Furthermore, steel processors face significant challenges related to increased competition from new market entrants and excess capacity, continued pricing constraints from customers, growing supply chain complexity, and substantial supply and demand volatility. All of this puts pressure on industry businesses to find new ways to remain competitive.
One organization that is meeting these challenges head-on is Worthington Industries, a global, diversified metals manufacturer based in Columbus, Ohio. With sales of $2.8 billion in its 2016 fiscal year, the company is one of the top independent processors of flat-rolled steel in the United States and one of the largest purchasers of steel in the nation, after automakers. That same year, the organization processed 6 million tons of steel. The three primary business units of Worthington Industries are steel processing, pressure cylinders, and engineered cabs.
Worthington Industries buys its steel from steel producers and processes it for customers in a variety of industries. The business offers a wide range of steel products including coated, hot-rolled, and cold-rolled strip products. The primary unit of production at Worthington Steel is processed steel coils, with gauge thicknesses ranging from 0.008 to more than 0.625 inches.
Steel is banded and protected with paper or plastic prior to shipment.
In 2014, the cold-rolled strip steel business unit required approximately 45 flow days to produce a coil of steel from receipt of raw material to shipment of finished goods. In addition, the firm was operating with a high level of inventory—well beyond its target. Meanwhile, on-time delivery performance and customer satisfaction were on a decline. The business traditionally focused on comparing delivery performance to internal promise dates rather than delivery performance to external customer request dates. As a result, the true needs of the customer sometimes were overlooked. Additionally, productivity and safety suffered because of the congestion brought on by high inventory levels. Professionals responsible for the cold-rolled strip steel business knew they needed to reevaluate their operating model.
In June 2015, the general manager challenged plant leadership and the transformation team to provide more value and better service to customers through improved on-time delivery performance and reduced lead times while continuing to encourage safety, quality, and productivity improvements. Ultimately, the general manager tasked employees with cutting inventory levels by 32 percent and achieving a 10 percent improvement in on-time delivery to customer requests. The teams responded by introducing a mechanism to control work-in-process (WIP) inventory at key steps in the plant, which, thus far, has lowered the inventory by 40 percent and achieved on-time delivery goals as well. The objective now is to continue to reduce stock in the system and improve on-time delivery to customer requests by another 10 percent.
How did they do it?
The Worthington Industries production process involves three basic operational steps—slitting, cold-rolling, and annealing—before products are again slit and then shipped to customers. Figure 1 depicts the production process for single-anneal coils. The plant receives pickled hot-rolled coils weighing approximately 20 tons from suppliers mostly located within a 200-mile radius. The coils are staged for the first operation, slitting, performed by either a 30-inch, 60-inch, or 72-inch slitter. They then go through cold-rolling by a tandem mill. This process step is followed by annealing. Products then undergo another rolling by either a tandem or a temper mill to reduce the gauge thickness to the desired measurement or enhance surface quality. This is followed by another slitting operation before products are shipped to the customer.
The annealing operation accounted for a very sizable portion of the value-added time. Thus, transformation team members decided to apply a control mechanism to the annealing process in order to maintain a constant amount of WIP. The process has 38 bases used in the heat, sock, and cool phases. Typically, there are five or six coils stacked on a single base at one time and many unique cycles for annealing based on targeted material properties. With the new WIP control mechanism, a coil was introduced into the heat phase only when annealing delivered a coil to its downstream process, and a limit was placed on the number of coils that were staged in advance of the annealing process.
This change initially delivered promising results, but the team still found it a challenge to develop a schedule for loading the bases. Part of the problem was that full hard coils produced upstream did not require annealing. Because they constituted 40 percent of the product mix, it was difficult to develop a slitting schedule that distributed the hard coils smoothly.
An operator rolls steel, taking reduction at three stands to change the thickness and the finish.
At the same time, team members were working toward reduced-soak-time process improvements via experimentation, shop-floor performance management, and optimized heat time through advanced heat transfer models involving coil composition and stack configuration. These developments, combined with a change in the product mix, soon caused the tandem mill process to have the highest workload.
In response, the team next applied the same WIP control mechanism to this process. Employees discovered scheduling at the tandem mill to be significantly more predictable and repeatable. They established a schedule that enabled processing of as many as 850 coils per week. This schedule is reviewed daily and updated each week depending on the actual product mix. The WIP control mechanism now is based on the target queue sizes in front of the tandem mill. There also is a target queue size in front of the annealing process.
Worthington Industries’ WIP control mechanism has led to significant improvements in the plant that are making Worthington Steel even more competitive. Immediately, WIP levels decreased by 47 percent from January 2015 to May 2016. The plant also reduced its raw materials and finished goods inventory levels, which, in turn, lessened flow time and enhanced the plant’s ability to react to customer orders. In fact, finished goods inventory levels were cut by 36 percent.
There also have been noteworthy safety advancements as a result of eliminating the stacking of coils, reducing human interaction with steel, and lessening congestion in the plant. Employees no longer have to hunt for coils, and less handling and stacking have brought about quality benefits as well.
Annealing is performed to soften steel for machining and remove all strains related to rolling the material to a specific thickness.
Another advantage of the implementation is that Worthington Industries can better communicate its production requirements to suppliers. This has increased purchasing frequency, as the business has shifted from monthly to bimonthly or even weekly orders. Employees are working to better leverage buys across multiple facilities to reduce accumulation of material beyond customer demand. Efforts to increase purchase frequency and reduce average order quantities likewise are underway.
Lastly, today there is a greater emphasis on machine reliability and total productive maintenance practices. Specifically, the business has dedicated maintenance technicians at key machines, and first-pass yield has reached 96 percent.
Ongoing efforts and future improvements
There is an enduring effort to keep improving product flow through the Worthington Industries steel-processing plant. The new targets call for an additional 40 percent flow-time reduction across the major paths, and kaizen events are focused on delivering these results. Additionally, team members remain uncompromising in their drive toward on-time delivery progress and fewer days of total inventory while expanding their focus to both upstream and downstream processes.
As part of a broader lean-transformation effort, Worthington Industries professionals are working to make flow more visually clear on the shop floor in order to highlight abnormalities and promote on-the-spot problem solving. There still is work ahead, but this relentless focus on end-to-end flow is enabling Worthington Steel to deliver new value to its customers and succeed in the increasingly challenging steel-processing industry.
Mandyam M. Srinivasan is the pilot corporation chair of excellence in business at the University of Tennessee. He may be contacted at firstname.lastname@example.org.
Pat Farragher is corporate transformation lead at Worthington Industries. He may be contacted at email@example.com.
Brad Kern is operations manager at Worthington Industries in the steel-processing area. He may be contacted at brad.kern@ worthingtonindustries.com.
Demetri Michaelides is the director of steel transformation at Worthington Industries in the steel-processing area. He may be contacted at firstname.lastname@example.org.
Frank Roberto, CSCP, is manager of the cold-rolled strip supply chain at Worthington Industries in the steel-processing area. He may be contacted at email@example.com.
Mike Toombs is the corporate transformation lead for operations at Worthington Industries. He may be contacted at michael.toombs@ worthingtonindustries.com.
Wes Wells is the manager of transformation for the cold-rolled strip steel business at Worthington Industries in the steel-processing area. He may be contacted at firstname.lastname@example.org.
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