Scope

The process industry sector (excluding chemicals) comprises essentially iron and steel and paper, and their manufacturing and distribution activities.

Background

Process industries have undergone some significant changes in the last 20 years:

• the means of production have been drastically rationalized and regrouped,
• borders have opened, resulting in a shift from local production in each country to globalized production and distribution,
• the industry has become more vertical, due to the increased integration of raw materials (mines, etc.), mass production upstream and the distribution networks,
• increasingly commonplace products have prompted the rise of low-cost manufacturers, despite the rise in transport costs (bulk products),
• markets cycles have become shorter and less predictable,
• the regions of consumption have also changed radically: Europe and the US are stagnating, while the demand in emerging countries (Asia, India, Brazil, etc.) is rocketing,
• the industry, which produces high quantities of greenhouse gases, has been severely impacted by new anti-carbon regulations.

The challenges

On an operational level, these significant changes have spawned four levers that can be used to boost performance: cost controls, innovation, optimization of stocks and differentiation through customer service. These levers must be used in a climate where the cycles of demand, purchase prices and sale prices are increasingly volatile and vary in a desynchronized manner.

Controlling and cutting costs

Three actions are necessary to cut costs:

1. The adaptation of capacity to medium/long-term demand (strategy plan)
   • the most capital-intensive means of production at the start of the chain are only profitable if they are used intensively (95% usage rate),
   • transport costs are high, a fact that encourages production close to the sources of raw materials (or at least the ports) and close to customers.
2. Improved global planning of the means of production(MPS):
   The necessary arbitration is complex (balance between sites, technical feasibility, cross-functionality, upstream-downstream integration) in order to react to the cycles. Orders must be allocated to the production sites dynamically (management of the ATP in a make-to-order context), at least by continent or zone.
3. Lean actions taken locally must make flows tauter and improve the productivity of the personnel.

Review the innovation and development processes

Designing products with greater added value is a significant growth factor. These products are put on the market increasingly quickly by the competition. So the key questions are: how to better select and manage projects, how to make projects more efficient (Lean engineering) and reduce the time to market, how to optimize development resources on a worldwide scale (which investment and/or specialization in which region, how to manage critical resources, etc.), etc.

Optimize stocks

Cycle effects (purchases, sales, demand) mean that stock management is a crucial lever that can be used to conserve the company’s margins: anticipate customer destocking, reduce stocks before the demand and the prices fall, increase stocks before the market recovers, etc.

The implementation of dynamic controls that cover the entire chain is a source of significant profit.

Make customer service a differentiating factor

Service offers are adapted to customer demands (automotive, oil, spot customers, etc.).

The simultaneous management of these offers is both complex and challenging. The offers are radically different (long-term contracts with built-in flexibility, spot orders, short-term orders, etc.) but they all use the same means of production and distribution. Their implementation demands precise, and often complex, supply chain management (upstream-downstream integration or decoupling point) that is crucial to performance.

How can Argon Consulting assist you?

We assist our customers in the process sector in the transformation needed to rise to these challenges, from the assessment of the issues they face to the application of a range of operational performance levers:

• service strategy and segmentation of service policies,
• industrial models and logistics patterns,
• overhaul of the supply chain processes: sales forecasts, S&OP, operational planning of flows, scheduling, decoupling points, delayed response, upstream-downstream interface, etc.
• industrial performance and Lean management (shorter and more reliable cycles, cost reductions),
• optimization of stocks all along the chain,
• optimization of distribution logistics (network and flows),
• excellence in logistics and transport,
• efficiency of the innovation processes, control and optimization of R&D resources, Lean engineering,
• optimization of information systems (master plan, assistance in making decisions, support),
• change implementation support,

Argon Consulting’s customers include the Arcelor group.