Process Industries

Argon assists players in the process industry with operational changes that enable them to tackle cost pressure and the need for cash in the context of globalization

We help companies in the process industry define and implement four key operational performance levers:

  • Cost efficiency
  • Inventory optimization
  • Differentiation through customer service
  • Optimization of the innovation and development processes

 

Context

The process industry sector (excluding chemical) essentially covers the metal and paper industries and their manufacturing and distribution activities.

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

  • 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 distribution networks
  • Increasingly common place products have prompted the rise of low-cost manufacturers, despite the rise in transportation costs (bulk products)
  • Markets cycles have become progressively shorter and less predictable
  • The regions of consumption have also changed radically: Europe and the US are stagnating or declining, while the demand in emerging countries (Asia, India, Brazil, etc.) is skyrocketing
  • The industry, which produces high quantities of greenhouse gases, has been severely impacted by new anti-carbon regulations

 

Challenges

On an operational level, these significant changes have resulted in four levers that can be used to boost performance: cost efficiency, innovation, inventory optimization, and differentiation through customer service. These levers must be implemented in a context in which cycles of demand, purchase prices, and sale prices are increasingly volatile and change at an uneven pace.

Controlling and cutting costs

Three complementary actions are required to cut costs:

  1. The adaptation of capacity to medium-/long-term demand (strategic plan):
  • The most capital-intensive means of production at the start of the chain are only profitable if used intensively (95% usage rate)
  • Transportation costs are high, thus prompting production close to sources of raw materials (or at least the ports) and close to customers

   2.  Improved overall planning of the means of production (MPS): reconciliation of the various factors (balance between sites, technical feasibility, cross-functionality, and upstream-downstream integration) to respond to the cycles is a complex affair. Orders must be allocated to production sites dynamically (management of ATP in a make-to-order context), at least by continent or zone

   3.  Lean initiatives,conducted locally, tighten flows and improve team productivity

Reviewing the innovation and development processes

Designing products with greater added value represents a significant growth factor. Putting products on the market more rapidly enables a company to differentiate itself and drive up prices, thereby reducing the margin squeeze. The key issues are, then, 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 global scale (the right investment and/or specialization for a specific region, managing critical resources, etc.), among others.

Inventory optimization

Cycle effects (purchases, sales, and demand) mean that inventory management is a crucial performance lever that can be used to preserve a company’s margins, such as anticipating customer destocking, reducing inventory before demand and prices fall, increasing inventory before the market recovers, etc.

The implementation of dynamic controls that cover the entire chain and apply to all levers (global vision, planning, logistics, lean, etc.) represents a source of significant profit.

Making customer service a differentiating factor

Service offerings are tailored to meet different customer requirements (automotive, oil, spot customers, etc.).

The simultaneous management of these offerings is both complex and challenging. The offerings 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 help you?

We help players in the process industry make the changes required to respond to the various challenges they face, from identifying said challenges to applying the full range of operational performance levers:

  • Service strategy and segmentation of service policies
  • Industrial models and logistics patterns
  • An 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, etc.)
  • Inventory optimization along the length of the chain
  • Optimization of distribution logistics (network and flows)
  • Excellence in logistics and transportation
  • Efficiency of innovation processes, control and optimization of R&D resources, and lean engineering
  • Optimization of information systems (master plan, assistance in making decisions, and support)
  • Assistance in implementing the necessary changes

 

Argon Consulting’s clients include:

Arcelor, Vallourec

Case Studies

Various levers can still be activated to optimize costs and control the margin