Hewing a StraightlineBy Mel Duvall | Posted 2002-06-17 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?
Hewing a Straightline
Which led U.S. Steel to found Straightline.
By early 2000, the management of U.S. Steel, which was then part of USX, was looking for ways to get its stock price up. The company brought in Arthur D. Little to help.
The ADL consulting team, led by Shanahan, concluded that U.S. Steel's supply chain management system, which was boosting productivity, reducing costs, and bringing partners together via the electronic network, was saleable.
The systems were "perfectly designed for steel." And since they were good at serving large customers, they likely could be adapted to help U.S. Steel serve smaller customers such as the Pate Company, a $5 million metal roofing products manufacturer, and Marconi Plc.'s Outside Plant and Power division, which makes telecom-equipment housing for the $9.4 billion communications company.
These were customers who bought U.S. Steel products through service centers. Any U.S. Steel operation would have to offer superior services.
But with features that would allow customers to know when products would be delivered almost as soon as they were ordered, the company thought it could build and maintain an advantage, through information delivery.
"The way we look at ourselves, part of our strategic differentiation is the fact that we can manage information very effectively to help out customers," says Straightline Chief Executive Officer Robert Dryburgh.
The iTrac inventory management system and the message network became integral parts of Straightline. Trudell's group also thought about using U.S. Steel's order management system, but realized Straightline needed a system more finely tuned for electronic commerce.
Straightline brought on Web-based applications that would be hard for other service centers to match, such as online credit checking and order aggregation.
For order aggregation, Straightline is using a product called SmartTrim from a company called Strategic Systems International. SmartTrim, first used in the paper goods industry, combines similar orders and then figures out means of moving products through the steel company's portfolio of processors in chains that eliminate as much waste and scrap as possible. SSI president Shoaib Abbasi said he expects Straightline to realize up to a 5% improvement in yields; that's the amount of product that can be produced from a given amount of original material. And, he notes, even cutting seemingly insignificant amounts of waste out of a production process can result in millions of dollars in savings over the course of a year for U.S. Steel.
Looking for more millions from seemingly small savings, Straightline chose LiveCapital's DecisionExpress software to speed up authorization of credit so buyers could purchase steel promptly, when wanted. The customer gets quickness, while Steel's savings are in reducing uncollectible debts.
But Straightline says its real power comes from the sum of the parts. Straightline says when it prices a product for a customer, it's able to take into account everything that will affect the price of that order. Factors such as determining whether the inventory of needed steel and processing capacity is available to fill orders lets Straightline quote extremely competitive prices in seconds. Other service centers sometimes need a day or two.
The main systems were bolted together in about seven months. As a result, there were some hiccups.
Synchronizing data was a chore, at first. In order to pull together a complete picture of orders, SSI's SmartTrim software needed to take a quick snapshot of data in Straightline's order management system. So a program was written in the Structured Query Language that allowed SmartTrim to pull data from tables in Oracle 8 databases. Only then could it create a view of what was going on with inventory.
But, according to Abbasi, it took anywhere from 10 to 15 minutes to complete a tabulation and synch up the two databases. Straightline rebuilt the process, adding several new indices and queries, so the two databases can be synchronized every two to three minutes.
There were other hurdles as well.
Straightline applications run on Sun servers in U.S. Steel's data center. But U.S. Steel admits that it took a little while to learn how to manage a Sun data center. When Straightline came online, the company did not install monitors to track the performance of pages served up by its Sun machines. If a Web page hung up for some reason, the technology team did not know about it until a user called. U.S. Steel has since installed a performance monitor, Patrol, from BMC Software.
But software idiosyncrasies weren't the only problem.
When the business was conceived in early 2000, its potential customers were still enjoying the fruits of a decade-long cycle of growth in the U.S. economy. But by the time Straightline was ready to begin test operations, in July 2001, the technology-driven dot-com bubble had burst, the country was mired in recession, steel prices were tumbling to all-time lows, the company was racking up its worst losses in a decade and it was distracted by a breakup of the company, as sibling Marathon Oil was split off from steel operations. U.S. Steel fell from being part of the 43rd largest company in America, with $33 billion in revenue, to a stand-alone company that would rank only 287th in the Fortune 500 if it had been independent last year.
Perhaps not the best time to launch a news sales initiative. Yet U.S. Steel plowed ahead.
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