Status Seeking

By Mel Duvall  |  Posted 2002-06-17 Print this article Print

The biggest American steelmaker would have the world—and the Bush administration, which is trying to save the company with fresh tariffs on products of foreign rivals—believe it is one of the most efficient producers around. Is it?

Status Seeking

A piece of steel that leaves the mill may go through as many as five different companies that treat, trim, shape and otherwise create a finished product born of steel. Customers, obviously, want to know where in this chain of processors their products are.

Using Oracle databases and its electronic document network, U.S. Steel began to build a system that could pull together the locations of individual products and entire orders, from its plants and those of its processors.

With ordering more accurate and the status of orders visible to customers, U.S. Steel had the beginnings of a system for managing its supply chain that could deliver tangible benefits to Ford or other big customers.

Its information systems could "handle the capture of orders, the pricing of orders, the interaction with the plant—and we were able to actually create a promise date for the customer as the order was being entered," Sherwin says

In effect, there could be no greater advance notice than telling a customer when an order would arrive at the moment an order was placed.

This was radical. In the 1990s, most manufacturers, including steelmakers, were just beginning to try to implement supply chain software to smooth out distribution. Many companies, according to the Boston Consulting Group's Michael Shanahan, bought quick-fix, third-party packages that were force-fitted into their existing systems.

Off-the-shelf software wouldn't satisfy U.S. Steel, though, says Shanahan. So Big Steel became a software developer.

It tied its order fulfillment system into i2 Technologies' Factory Planner, a forecasting tool. Next came the homegrown order-status system. Then U.S. Steel mixed in two existing homegrown, mainframe-based systems: an inventory control system called iTrac it developed to keep tabs on material as it moved through its production facilities; and an automatic, order-generation system called the Mechanical Item Generation System, or MIGS.

MIGS was developed in the early 1990s to reduce coil inventory at the company's mill in Gary, Ind. If Gary could better-forecast demand for finished goods at a customer's location, such as fenders and doors, then it could reduce the inventory it needed to keep on hand.

MIGS, an IMS database application written internally in Cobol, was designed as an automated order entry sys- tem for repeat customers. By better understanding their demands, the company found it didn't need to keep as much steel on hand. In early usage, MIGS reduced inventories from approximately 33,500 tons to 24,000 tons. The system, which has been tweaked over the years, is now called the Mechanical Order Generation System, or MOGS.

ITrac, on the other hand, was developed to better track inventory outside the mills—from production to processing to delivery.

ITrac consists of three main elements: a piece that reports on the status of orders to U.S. Steel managers or its customers; a piece that tracks unfinished goods as they are moved between processors; and, a piece that handles messages over the electronic document network.

The sweep of the order and inventory tracking systems, for a continuous flow manufacturing business like steel, "is astonishing," contends BCG's Shanahan, a consultant to U.S. Steel. "They can go from the shop, through their own production facilities, all the way through a third-party services center, to customers—and they can manage that entire supply chain through one integrated system.''

Today, 38% of the company's orders for sheet metal and tin orders come in through the supply chain management system. Better forecasting means U.S. Steel supported $6.4 billion in revenue in 2001 with $870 million of inventory, compared to $946 million of inventory when it generated $6.1 billion in revenue in 2000.

More simply put, U.S. Steel now keeps just 20 days' worth of inventory on hand to meet demand, where it kept 33 days' worth on hand in 2000. That means tens of millions of dollars saved every year.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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