logistics management and cost reduction

Logistics Management and Cost Reduction in Steel Plants Prepared by: Nasser Mohamed Zaky65/1

Logistics Management and Cost Reduction

In

Steel Plants

Prepared By : Nasser Mohamed ZakyLogistics Senoir Manager – Ezzsteel – Suez - Egypt

E-mial: [email protected]: 00201006054604

Supervisor : Dr. Mohamed Elmaadawy

“This thesis for fulfillment of master degree in international logistics”


Contents

INTRODUCTION........................................................................................................................................... 4

CHAPTER 1 STEEL MAKING SUPPLY CHAIN LOGISTICS................................................................................ 5

1.1- GENERAL INFORMATION ABOUT STEEL: ........................................................................................................ 51.1.1 What is Steel? ............................................................................................................................. 51.1.2 Steel Inventor .............................................................................................................................. 51.1.3 Steel Making: .............................................................................................................................. 61.1.4 Flat Steel Product ........................................................................................................................ 71.1.5 Long Steel Product....................................................................................................................... 71.1.6 Mini-Mill ..................................................................................................................................... 71.1.7 Steel Worldwide Production ........................................................................................................ 71.1.8 The Most Steel Makers ................................................................................................................ 71.1.9 Steel Recycling............................................................................................................................. 81.1.10 Different Types of Steel Grades.................................................................................................. 8

1.2. THE MEANING OF SUPPLY CHAIN MANAGEMENT........................................................................................... 91.2.1 Supply Chain Management (CLM, CSCMP) Definition .................................................................. 91.2.2 Steel Industry Supply Chain members and flows: ......................................................................... 9

1.2.2.1 Make to stock production mode: ........................................................................................ 101.2.2.2 Make to order production mode: ....................................................................................... 11

1.2.3 The Objective of Supply Chain Management.............................................................................. 131.2.4 The importance of Supply Chain Management .......................................................................... 13

1.3 LOGISTICS MANAGEMENT ....................................................................................................................... 141.3.1 The Meaning of Logistics Management ..................................................................................... 141.3.2 The Importance of Logistics Management ................................................................................. 141.3.3 Logistics Activities ..................................................................................................................... 16

1.3.3.1 The Key Activities ............................................................................................................... 161.3.3.2 The Support Activities......................................................................................................... 18

1.3.4 Material handling in steel plant ................................................................................................. 201.3.4.1 Material handling definition ............................................................................................... 201.3.4.2 Material handling is a Key Activity in Steel Plants ............................................................... 20

1.3.5 By-Products Warehouse ............................................................................................................ 221.3.5.1 By-Products warehouse definition ...................................................................................... 221.3.5.2 By-Products Warehouse Purpose ....................................................................................... 221.3.5.3 The role of By-Products warehouse .................................................................................... 221.3.5.4 By-Products Warehouse Functions ..................................................................................... 221.3.5.5 By-Products Warehouse Documents .................................................................................. 23


1.3.5.6 By-Products Warehouse Importance and Benefits.............................................................. 231.4 DIFFERENCE BETWEEN LOGISTICS MANAGEMENT AND SUPPLY CHAIN MANAGEMENT............................................ 241.5 INTERNATIONAL STEEL PLANTS TREATMENT OF BY-PRODUCTS ......................................................................... 27

1.5.1 ArcelorMittal Profile .................................................................................................................. 271.5.2 Recycling of slag as an example................................................................................................. 27

CHAPTER 2 RESEARCH CASE STUDY ......................................................................................................... 31

2.1 RESEARCH PROBLEM DESCRIPTION: ........................................................................................................... 312.2 RESEARCH PROBLEM ILLUSTRATION: .......................................................................................................... 322.3. MATERIAL HANDLING SYSTEM DESIGN, IMPLEMENTATION AND RESULTS ........................................................... 38

2.3.1 System Design: .......................................................................................................................... 382.3.1.1 Collection of Information:................................................................................................... 382.3.1.3 Hold several internal review meetings: ............................................................................... 492.3.1.4 Internal Material Handling Supply Chain Design (Hidden Supply Chain): ............................. 502.3.1.5 Review the design: ............................................................................................................. 55

2.3.2 System Implementation:............................................................................................................ 552.3.3 System Results:.......................................................................................................................... 56

2.3.3.1 Revenue from sold by-products: ......................................................................................... 562.3.3.2 Recycled home scrap: ......................................................................................................... 572.3.3.3 Photographs of some results: ............................................................................................. 59

CHAPTER 3 DISCUSSIONS AND CONCLUSION ........................................................................................... 61

3.1 DISCUSSIONS........................................................................................................................................ 613.2 CONCLUSIONS AND RECOMMENDATIONS .................................................................................................... 63

REFERENCES .............................................................................................................................................. 65


IntroductionLogistics Management System (LMS) has recently gained a great deal of attention. LMS is

the process of planning, implementing, and controlling the efficient, effective flow and

storage of goods, services, and related information from point of origin to point of

consumption for the purpose of conforming to customer requirements [1].

Logistics activities are divided into two main activities, key activities and supporting

activities. Key activities are customer service, inventory management, transportation, and

information technology. Supporting activities are warehousing, packaging, purchasing,

material handling …etc.

LMS is being mandated to all fields for both tangible and intangible products, as well as light

and heavy industries.

Steel factories always give most of the efforts to production side either quality or quantity

and give less efforts to manage the handling of by-products which are produced forcedly

during manufacturing of the final product. Even these efforts are directed to metallic items

since it is recycled and ignore others in spite of all By-Products are valuable if it is properly

managed. These By –Products either can be recycled in the same plant or can be sold to

a different customers. This inefficient reaction leads to increase the cost of production by the

percentage of these losses during materials handling and production processes.

Problem started from random handling of materials and generated by-products i.e. without

using designed system showing the life of each item since inception to demise. Then

accumulation of generated by-products which make the solution after some years more

costly and mixing of different by-products together maximizes the problem.

Material handling and by-products warehouse are playing an essential role to organize and

control all by-products to be either recycled in the steel plant or to be sold to other

customers.

The objective of this research is to study the impact of logistics management in cost

reduction in steel plants.


CHAPTER 1

Steel Making Supply Chain Logistics

1.1- General information about steel:

1.1.1 What is Steel?

Steel is an alloy of iron and carbon containing less than 2% carbon and 1% manganese

and small amounts of silicon, phosphorus, sulfur and oxygen. Steel is the most

important engineering and construction material in the world. It is used in every aspect

of our lives, from automotive manufacture to construction products, from steel toecaps

for protective footwear to refrigerators and washing machines and from cargo ships to

the finest scalpel for hospital surgery [2].

1.1.2 Steel Inventor

A British inventor called Henry Bessemer is generally credited with the invention of

steel in 1856. He founded the Bessemer Steel Company in Sheffield, England, but up

to 1859 the company made a loss. By the time the patent ran out in 1870 he had made

more than 1 million pounds sterling. Steel is still produced using technology based

upon the Bessemer Process of blowing air through molten pig iron to oxidize the

material and separate impurities [2].

•


1.1.3 Steel Making:

Steel is made via two basic routes: from raw materials - iron ore, limestone and coke -

by the blast furnace and basic oxygen furnace route; or from scrap via the electric arc

furnace (EAF) method. The raw material approach is known as the integrated route and

about 60% of steel produced today is made by this method. The second technique is

much easier and faster since it only requires scrap steel. Recycled steel is introduced

into a furnace and re-melted along with some other additions to produce the end

product. About 34% of steel produced in 2003 was produced via the EAF route [2].

Figure 1.1: Illustrate two basic routes of steel making [3]


1.1.4 Flat Steel Product

A flat steel product is a plate product or a (hot or cold) rolled strip product. Typically

steel is rolled between sets of rollers to produce the final thickness. Plate products vary

in dimensions from 10 mm to 200 mm and thin flat rolled products from 1 mm to 10

mm. Plate products are used for ship building, construction, large diameter welded

pipes and boiler applications. Thin flat products find end use applications in

automotive body panels, domestic 'white goods' products, thin cans' and whole host of

other products from office furniture to heart pacemakers [2].

1.1.5 Long Steel Product

A long product is a rod, a bar or a section - typical rod products are the reinforcing rods

for concrete, engineering products, gears, tools etc. are typical of bar products and

sections are the large rolled steel joists (RSJ) that are used in building construction

projects. Wire-drawn products and seamless pipes are also part of the long products

group [2].

1.1.6 Mini-Mill

A mini-mill is a molten-steel-producing process that feeds scrap steel into an electric

arc furnace to re-process the material into finished steel for new applications. (See

1.1.3) [2].

1.1.7 Steel Worldwide ProductionSteel is indispensable to our modern way of life and essential to economic growth. In

2007, 1.3 billion tones of steel were produced and production levels are expected to

double by 2050 to meet the growing demand for steel around the world.[3].

1.1.8 The Most Steel Makers

China produced more than 400 million tons of crude steel, making it the first country

to exceed 400 million tons of crude steel in a year [4].


1.1.9 Steel Recycling

Of the 960 million tons of steel produced in 2003, more than 60% of it was produced

from recycled steel. Steel is the world's most recycled material; indeed one of the two

major steel production techniques uses exclusively 100% recycled steel. The additional

good news is that the properties of steel remain unchanged no matter how many times

the steel is recycled. The steel in your car body might have been a panel from a

washing machine in a previous life and even that panel might have been a drink can! In

2001 in North America more than 14.5 millions cars were recycled which is 27 cars per

minute! In the United Kingdom 2.5 million refrigerators are replaced annually. In 2002

in South Africa, 64% of all beverage cans were recycled. The country consumes about

3 billion cans annually [2].

Table:1.1: Illustrate amount of recycled steel worldwide -million metric ton [3]

Recycled steelconsumption

Recycled steelconsumption

Apparent domestic supply

EU-27 115.6 117.8

Other Europe 25.3 10.9

CIS 50 58.2

NAFTA 81.3 96.1

Central/South America 14.3 14.4

Asia 189.2 172.8

World 481.9 478.9

1.1.10 Different Types of Steel Grades

Steel is not a single product. There are currently more than 3,500 different grades of

steel with many different properties - physical, chemical, environmental - 75% of

which have been developed in the last 20 years. If the Eiffel Tower were to be rebuilt

today the engineers would only need one-third of the amount of steel, modern cars

have new steels with higher strength reducing the overall shell weight by 25% [2].


1.2. The Meaning of Supply Chain Management

1.2.1 Supply Chain Management (CLM, CSCMP) Definition

Council of Logistics Management (CLM) and Council of Supply Chain Management

professional (CSCMP) defined supply chain management as the following:

Supply chain management encompasses the planning and management of all activities

involved in sourcing and procurement, conversion, and all logistics management

activities. Importantly, it is also includes coordination and collaboration with channel

partners, which can be suppliers, intermediaries, third – part service providers and

customers, in essence, Supply Chain Management integrates supply and demand

management within and across companies [1].

1.2.2 Steel Industry Supply Chain members and flows:

The supply chain consists of all parties involved, directly or indirectly, in fulfilling a cus-

tomer request. The supply chain includes not only the manufacturer and suppliers, but

also transporters, warehouses, retailers, and even customers themselves within each

organization, such as a manufacturer, the supply chain includes all functions involved in

receiving and fulfilling a customer request. These functions include, but are not limited

to, new product development, marketing, operations, distribution, finance, and customer

service. The supply chain is dynamic and involves the constant flow of information,

product, and funds between different stages [5].

Steel supply chain either make to stock production mode or make to order production

mode based on the type of steel product either long or flat steel since the application of

long steel is common and commercial but application of flat steel is specific, next section

will have an explanation about both modes :


1.2.2.1 Make to stock production mode:

The meaning of this mode is shown below through explanation of its impact in following points:

Inventory policies: Inventory planning depend on forecasting of demand and

market needs with keeping of buffer stock to secure uncertainty in the demand

or supply which provides a well-designed replenishment policy for restocking

with optimizing of productivity, also we can keep speculative stock in case of

boom expectations, risk of market needs changes is less than other mode, this

mode applicable in case of long steel as an example since the customer needs

are defined in advance and most likely are the same.

Economies of scale: This mode allows steel makers to gain the benefits of

economies of scale, as an example produce same steel grade for certain period

which keep high productivity and consequently reduce the cost of production.

Material Management (Inbound Logistics): Material management based on

this mode are dealing with the same material and may changes only due to

looking for better quality or better price, this way lead to reduce the safety

stock of special alloys since all materials are known in advance and nothing

connected with customer requests.

Supply Chain Members: This mode included all supply chain members i.e.

supplier, manufacturer, distributor, retailer and consumer since steel plant is

difficult to deal directly with end consumer because this way isn’t applicable

due to a high number of customers with a small customer needs which lead to

increase the transportation costs and interrupt internal logistics activities,

Figure 1.2 illustrates a schematic of steel supply chain parties.


Figure 1.2, Illustrate steel supply chain – make to stock production mode

Stee l M aking Supply C hain – M ake to Stock Production M ode

In fo rm atio n , Pro d u ct, Serv ices, Fu n d s, an d K n o w led ge flo w s

S upplier M anufacturer D istributer R eta iler C onsumer

1.2.2.2 Make to order production mode:

The meaning of this mode is shown below through explanation of its impact in following points:

Inventory policies: This mode leads to unplanned Inventory which leads to

a long lead time since production processes start after receive the orders from

the customers. steelmaking processes have some constraints that generate

unplanned stock, customer needs are varies and may has a change in some

parameters from order to another such as width, thickness, chemical

composition and mechanical probabilities, in case of the steel plant takes a risk

and produce randomly, this situation will lead to have a stock is waiting a

customer who will come after a long time or not come and then sell this stock

with less price to generate cash, this mode applicable in case of flat steel as an

example.

DemandSupply + Cash Flow


Economies of scale: This mode does not allow steel makers to gain the

benefits of economies of scale, as an example steel production are going in

batches every day and change steel grade from batch to another leads to

a waste in time and materials which leads to reduce productivity and

consequently increase the cost of production.

Material Management (Inbound Logistics): Material management are

conservative by keeping higher safety stocks of some materials such as special

alloys which are urgent needed to produce certain orders and even the quality

of scrap must be better than other mode and sponge iron must be a part of

charge mix to satisfy customer needs.

Supply Chain Members: This mode included supplier, manufacturer,

distributor and consumer and does not include retailers since supply chain

starts after the consumer sends his order and the role of the distributor is to

collect a small orders from a different consumers and issue one big order to

the manufacturer which gives him a better price negotiation either for

transportation or steel price itself and consequently it helps the manufacturer

to have a consistent production.

Figure 1.3, Illustrate steel supply chain – make to order production mode

S te e l M a k in g S u p p ly C h a in – M a k e to O rd e r P ro d u c t io n M o d e

In fo r m a t io n , P ro d u c t , S e r v ic e s , F u n d s , a n d K n o w le d g e f lo w s

S u p p lie r M a n u fa c tu r er

D is t r ib u te r C o n s u m e r

DemandSupply + Cash Flow


1.2.3 The Objective of Supply Chain Management

The objective of every supply chain should be to maximize the overall value generated.

The value is generated by the supply chain through the difference between what the final

product is worth to the customer and the costs the supply chain incurs in fulfilling the

customer's request. For most commercial supply chains, value will be strongly correlated

with the supply chain profitability (also known as supply chain surplus), the difference

between the revenue generated from the customer and the overall cost across the supply

chain [5].

1.2.4 The importance of Supply Chain Management

Supply chain design, planning, and operation decisions play a significant role in the success

or failure of a firm.


1.3 Logistics Management

1.3.1 The Meaning of Logistics Management

CLM has defined Logistics Management as the following:

Is the process of planning, implementing, and controlling the efficient, effective flow and

storage of goods, services, and related information from the point of origin to the point of

consumption for the purpose of conforming to customer requirements, note that this

definition includes inbound, outbound, internal, and external movements, and return of

materials for an environmental purposes. [1].

Is the process of planning, implementing, and controlling the efficient, cost effective flow

and storage of raw materials, in-process inventory, finished goods and related information

from the point of origin to the point of consumption for the purpose of meeting of the

customer requirements [1].

1.3.2 The Importance of Logistics Management

Logistics is the one important function in business today. No marketing, manufacturing

or project execution can be succeeding without logistics support.

Logistics is comparatively a new term, but not the operation. Logistics has existed since

the beginning of the civilization. Raw material and finished products are always moved

from point to another in a small scale. Things began to change with the advance in

transportation. Population began to move from rural to urban areas and to business

centers. No longer did people live near to the production centers, nor did production take

place near residence centers. The geographical distance between the production point and

consumption point increased.


.

Another factor has come into play recently. Since the early 1990's, the business scene has

changed. The globalization, the free market and the competition has required that the

customer gets the right material, at the right time, at the right point and in the right

condition… at the lowest cost.

Logistics is about creating values – values for customers and suppliers of the

organization, and value for the organization’s stakeholders. Value in logistics is

expressed in terms of time and place. Products and services have no value unless they are

in the possession of the customers when (time) where (place) they wish to consume them.

Logistics has become and increasingly important value adding process for a number of

reasons:

1. Costs are significant.

2. Supply and distribution line are lengthening.

3. Logistics is important to strategy.

4. Logistics adds significant customer value.

5. Customers increasingly want quick and customized response.


1.3.3 Logistics Activities

Logistics activities to be managed vary from organization to another depend on the

structure of each organization, management’s honest differences of opinion about

what constitutes logistics and the importance of individual activities to its operations.

According to the CLM the components of a typical logistics system are customer

service, demand forecasting, distribution communications, inventory control, material

handling, order processing, parts and service support, plant and warehouse site

selection (location analysis), purchasing, packaging, return goods handling, salvage

and scrap disposal, traffic and transportation, and warehousing and storage.

The logistics components are usually divided into key and supporting activities, along

with some of decisions associated with each activity.

From this research view point material handling considered as a one of the key

activities in a steel plant which must be managed under logistics organizations to

achieve logistics objectives.

1.3.3.1 The Key Activities

1- Customer Service Standards

Customer wants and needs.

Customer response to service.

Setting customer level[6]

2- Transportation.

Mode and transport service selection.

Freight consolidation.

Carrier routing.


Vehicle scheduling.

Equipment selection.

Claims processing.

Rate auditing [6]

3- Inventory Management:

Raw material and finished goods stocking policies.

Short- term sales forecasting.

Product mix at stocking points.

Number, size and location of stocking points.

Just in time, push and pull strategies [6]

4 -Material Handling:

Determine inputs and outputs.

Order-picking procedures.

Equipment selection.

Equipment replacement policies.

Stock storage and retrieval [6].

5- Information flows and order processing:

Sales order- inventory interface procedures.

Order information transmittal methods.

Ordering rules. [6].


1.3.3.2 The Support Activities

1- Warehousing:

Space determination.

Stock layout and dock design.

Warehouse configuration.

Stock placement [6].

2- Purchasing:

Purchasing policies.

Supply source selection.

Purchase timing.

Purchase quantities [6].

3- Protective packaging design

Handling.

Storage.

Protection from loss and damage [6].

4- Cooperation with production and operations:

Specifications of aggregate quantities.

Sequence and time production output [6].


5- Information maintenance:

Information collection, storage, and manipulation.

Data analysis.

Control procedures [6].

6- Other activities:

After – sales parts and services support.

Maintenance functions.

Return goods handling.

Recycling operations [6].

What ties all of these activities or functions together is their ability to impact

customer satisfaction. Top management should utilize logistics as a way to integrate

these activities and keep them focused on the customer rather than on the internal

processes. By integrating these activities into a customer focused logistics system,

the organization can develop a sustainable advantage that is very difficult for a

competitor to imitate.


1.3.4 Material handling in steel plant

1.3.4.1 Material handling definition

Material handling is a manual or mechanical carrying, moving, delivering or working

with something, handling of raw material, spare parts and generated by-products to its

place in time safely.

1.3.4.2 Material handling is a key activity in the steel plants

Material handling considered as a supporting activity in the most of logistics

organizations in different fields but in the steel making it is a key activity due to the

following:

1. It is an essential part of steel making process which include:

Discharging of incoming raw materials, consumables, spare parts,

lubricants in its location and moving whatever to be stored in covered

warehouses.

Feeding production units with their requirements from warehouse in time.

Segregation of scarp in scarp yards from nonconductive materials, tanks,

explosives and impurities.

Cutting of over size scarp to suitable sizes for Electric Arc Furnaces (EAF).

Moving of all usable scrap to charging locations in a quantity and a quality

needed to guarantee a continuous operation and to avoid production

interruption.

Moving of unusable scrap to certain location to have a further processes

and to separate the valuable metals such as nickel, copper, aluminum …etc,

and transport sand and concrete to the outdoor areas.

Moving of all generated home scrap 24hrs/7 days to the preparation areas to

avoid plant interruption and to start immediately cutting processes which


optimize cash flow since using of these home scrap as an input again will

reduce payments of buying a new scrap.

Moving of prepared home scrap after checking of their sizes and quality to

charging locations.

Empty areas, silos and boxes of generated by-products in the indoor areas

24hrs/7 days.

Classifying of generated by-products in the indoor areas through putting of

each type separately to avoid mixing since separation is adding value for

each by-product and facilitates recycling or selling to other plants.

2. Delay in material handling process such as delaying in evacuating of generated

home scrap or other by-products like slag from under the furnaces will lead to

production interruption.

3. Mistakes during segregation of scrap such as passing of gas cylinders lead to

explosions in the furnaces and may lead to a big disaster for the whole steel

plant.


1.3.5 By-Products Warehouse

1.3.5.1 By-Products warehouse definition

By-Products warehouse is a place, manpower and system organize and control

receiving, storing and issuing of wasted or scraped items either from production

units or from other warehouses.

1.3.5.2 By-Products Warehouse Purpose

Control and Organize all wasted items in a way environmentally accepted.

1.3.5.3 The role of By-Products warehouse

As we have raw material warehouse to organize and control the receiving of items

from purchasing and issue of items to production units we must have a By-Product

warehouse to organize and control the opposite i.e. receiving of wasted items

from production units and issue of sold items to the customers based on

coordination with material handling , sales and financial department.

1.3.5.4 By-Products Warehouse Functions

Receive all generated by-products through material handling section such as

expired materials from all warehouses, foreign materials of incoming scrap,

scales, slag, fine lime, used parts incoming from maintenance, wood, drums

, used Oils…etc. and record all these items in data base.

Make coordination with all plant units concerning the wasted items.

Issue reports showing stocks and sold quantities..

Make control of by-products locations to avoid throwing of wasted items

every where, specially the small items which affected the shape of the plant.

Make coordination with sales department and provide them with all the

required data.

Join the invited customers from sales department inside the plant during

their visits to show them the By- products.


Follow up loading of By-Products from the plant.

Issue all the required warehouse documents concerning sold By-Products.

Control issue of sold items according to payment notes which received from

financial department.

Provide financial department with the documents and reports to control the

customer's accounts.

1.3.5.5 By-Products Warehouse Documents

Bin card for each item in a software.

Scrap sheet.

Weighbridge ticket.

Adding voucher

Issuing Voucher.

By-products status report.

1.3.5.6 By-Products Warehouse Importance and Benefits

By-Products warehouse is essential in any factory since the entire new items

have life cycle and at the end it must become scrap. As new items can become

obsolete due to new developments or expired due to a shelf life. Also during

production process we always have by-products.

All these items have value either by recycling in the same factory or in other

plants and to be used as a raw materials which in total make utilization of all

resources in a way environmentally accepted which resulted in a high

efficiency and high effectiveness..

By-Products warehouse is playing an essential role in organizing and controlling

of all these items until recycled in the same plant or sold to other customers.


1.4 Difference between Logistics Management and Supply Chain Management

The following comes from the Council of Logistics Management Definitions (Cut and

pasted from their website): :

The Definition of logistics management is that part of the Supply Chain Management

process that plans, implements, and controls the efficient, effective forward and reverse

flow and storage of goods, services, and related information between the point of origin

and the point of consumption in order to meet customer requirements .

These are the boundaries and relationships of Logistics Management adopted by the

Council of Logistics Management: "Logistics Management activities typically include

inbound and outbound transportation management, fleet management, warehousing,

materials handling, order fulfillment, logistics network design, inventory management of

third party logistics services providers. To varying degrees, the logistics function also

includes sourcing, procurement, production planning and scheduling, packaging and

assembly, and customer service. It is involved in all levels of planning and execution --

strategic, operational and tactical. Logistics Management is an integrating function,

which coordinates and optimizes all logistics activities, as well as integrates logistics

activities with other functions including marketing, sales manufacturing, finance and

information technology. .

The Definition of Supply Chain Management encompasses the planning and

management of all activities involved in sourcing and procurement, conversion, and all

Logistics Management activities. Importantly, it also includes coordination and

collaboration with channel partners, which can be suppliers, intermediaries, third-party

service providers, and customers. In essence, Supply Chain Management integrates

supply and demand management within and across companies. .

http://cyber.econ.pu.ru/downloads/alm_1_3.pdf


These are the boundaries and relationships of Supply Chain Management adopted by the

Council of Logistics Management: "Supply Chain Management is an integrating

function with primary responsibility for linking major business functions and business

processes within and across companies into a cohesive and high-performing [7]

Table 1.2, Supply Chain Logistics Relationships

Supply Chain Management Logistics Management

Plan to Manage the resources Plan to manage the flow of material,information and cash

Sources Material Management (InboundLogistics)

Make Manufacturing Logistics SupportDelivery Physical Distribution (outbound

Logistics)Return Reverse Logistics

Table 1.2 summarized the differences between supply chain and logistics which can be

explained as the following:

Supply chain management is concerned with creating a plan to manage the whole

resources that go towards meeting customer demand for goods or services. Also

selection of suppliers that will deliver the materials and services the company needs to

create its product (goods or services). In additional to the whole processes to make the

product including manufacturing steps, testing, packaging, and preparation for delivery

and coordinate the receipt of orders form customers. Then develop a network of

warehouses, pick carriers and setup an invoicing system to receive payments and create

a network for receiving of the defective and excess products back from customer.

Supply chain build the design of all drivers which are facility, inventory, transportation,

information, sourcing and pricing and link them with other entities in the pipe line i.e.


suppliers, customers, and all stakeholders within the concept of “the whole is greater

than the sum of its parts”.

Logistics are concerned with creating a single plan to manage the flow of material,

information and cash of the organization. Also the flow of inbound logistics to feed the

plant with the required material through materials management. In additional to support

manufacturing processes through transportation, material handling and information.

Then outbound logistics to deliver the products to the customer and finally organize the

return of those products in case they are is not satisfied the customer, the whole

processes of logistics are running around order fulfillment.


1.5 International Steel Plants Treatment of By-Products

To see where we are from others a brief will be given about how international

companies are dealing with such by-products, an example considered ArcelorMittal for

slag handling and utilization.

1.5.1 ArcelorMittal Profile

ArcelorMittal is the world's number one steel company, with 310,000 employees in more

than 60 countries. It has led the consolidation of the world steel industry and today ranks

as the only truly global steelmaker.

ArcelorMittal is the leader in all major global markets, including automotive,

construction, household appliances and packaging. The group leads in R&D and

technology, holds sizeable captive supplies of raw materials and operates extensive

distribution networks.

Its industrial presence in Europe, Asia, Africa and America gives the group exposure to

all the key steel markets, from emerging to mature. ArcelorMittal will be looking to

develop positions in the high-growth Chinese and Indian markets [8]

1.5.2 Recycling of slag as an example

During my visit to Cloose S.A. slag processing plant in Luxembourg 19 – 21 September

2007 ,I found they built integrated plant specially for processing of slag which produce

slag with different specific specification matching to the application filed ,the process

flow as follows:

Raw slag comes from the steel plants.

Slag pass through metal recovery unit to separate the included steel parts.

Slag crasher to crush slag to certain size.

Crushed slag pass through several sieves to get the exact size for slag aggregates.


Handling and stored then sold to recycle in a different applications since they are

using slag in roads, rivers, cement companies as a raw material.

These plants are not producing slag only but also separating steel metals which are used as

raw materials for steel plants which utilize the whole quantity [9].

Below Figures # 1.4, 1.5& 1.6 are some photographs shows slag processing plant and its

applications.

Figure 1.4, photograph shows slag metal separation unit which used for processing slag and

separating metal.


Figure 1.5, a) photograph shows different sizes made from slag that meets different applicationsfields, b) photographs shows application of slag for the road construction.

a)

b)


Figure 1.6, a) Photograph shows application of slag for protecting the reveres beaches; b)photograph shows application of slag as building material.

b)

a)


CHAPTER 2

Research Case Study2.1 Research Problem Description:

In this chapter the situation in some steel factories will be introduced since they always give

most of the efforts to production side either quality or quantity and give less efforts to

manage the handling of By-Products which are produced forcedly during manufacturing of

the final product. These efforts are directed to the metallic items which to be recycled in a

steel plant and ignore others in spite of all By-Products are valuable if it is properly

managed. These By-Products either can be recycled in the same plant or can be sold to

different customers. This inefficient reaction leads to increase the cost of production by the

percentage of these losses during materials handling and production processes.

Problem started from the random handling of materials and generated By-Products i.e.

without using designed system showing the life of each item since inception to demise. Then

accumulation of generated by-products which make the solution after some years more

costly and mixing of different by-products together maximizes the problem.

Below the summary of the problem and figures 2.1, 2.2, 2.3, 2.4&2.5 are some photographs

showing the situation in some steel plants:

Damaging of materials and sometimes losing a part of bulk materials during

handling.

Losing of around 2.3% of foreign materials and scrap dust from consumed scrap.

This percentage calculated based on the historical data of three years (see table 2.1

- scrap consumption in the research case study). Value of this percentage in one

year equal 37million L.E in case of an average scrap price per ton is 2200L.E

which leads to increase the production cost.


Losing of around 1.3% of steel with slag generated from production processes.

This percentage calculated based on experimental studies. Value of this

percentage in a one year equal to 6 million L.E in case of an average scrap price

per ton is 2200L.E which added to production cost.

Holding of home scrap for long time without preparation which means losing a

part of cash flow and increase the production cost by the interest of a new finance.

Accumulation of a different solid By-Products, scrap spare parts and consumables

which also increase the total costs by the storage costs and double or triple

handling of these By-Products.

Occupied wide yards which affected negatively on the movement and organizing

of the other logistics activities.

Continuing of this problem without solution make solution more difficult and

more costly.

Material handling and by-products warehouse are playing an essential role in avoiding

damages or losses of materials or By-Products during handling steps, separating, recycling

and help in selling of all these foreign materials and generated By-Products which leads to

cost reduction if they are properly managed.

2.2 Research Problem Illustration:

The research problem will be clarified through some photographs illustrated in Figures

2.1,2.2,2.3,2.4&2.5 which clearly show the accumulation and mixing of some By-Products

together which maximize the problem and make the solution more difficulty and costly in

spite of these By-Products are valuable if they are managed in a proper way.


Figure 2.1, . a),b) ,c) &d) Photographs show mixing of scrap and steel metals with slag

a) b)

c)d)


Figure 2.2, . a),b) ,c) &d) Photographs show mixing of slag with fume dust.

a) b)

c)d)


Figure 2.3, . a),b) ,c) &d) Photographs show mixing of slag, fume dust and fine lime.

a) b)

c)d)


Figure 2.4 , a) Photographs show accumulation of scrap dust, b) showing accumulation of fine lime .

a)

b)


Figure 2.5, a) Photograph shows accumulation of scraped jumbo bags, b) photographs show accumulation of

cartons.

The previously illustrated figures clearly shown the existence of the problem in some steel plants

and hence in this research we shall focus on the role of material handling and by-products

warehouse through application of designed system in organizing the flow of incoming materials,

recycling and selling of all generated by-products which lead to smooth operation, improve

efficiency and finally production cost reduction.

Mixed Slag, Fume dust,Scrap & Fine lime

a)b)


2.3. Material Handling System Design, Implementation and Results

2.3.1 System Design:

2.3.1.1 Collection of Information:

To establish and design system we have to collect information about production

inputs and outputs in the steel plant including generated By-Products.

In case of a new plant and we need to initiate system for material handling and By-

Products warehouse we have to use the plant operation manuals as a reference but in

case of operated plant we have to use actual figures from plant records as we made in

this research since we collected the actual information.

In Table 2.1 & 2.2 the final numbers are shown since there are a lot of details such as

consumption rate per ton or generation rate of By-Products based on each ton

produced.

This information used also to make a traffic calculation in the internal roads, since

a traffic jamming was found in some gates and weighbridges which led to delay

during material and By-Products handling, so modifications were done to have

smooth movements.

In the next section the collected information about materials and By-Products flows

based on an actual situation of plant produced Hot Rolled Coils – Flat Steel with

capacity of 900.000mt/year and lime plant with capacity of 100,000mt/year of quick

lime.


2.3.1.2 Raw Materials Handling Flow:

Table 2.1 shows the raw materials handling flow which includes the following

information:

◌Column #1 shows the index of used materials which later will be used as

a code of Materials handling procedures.

Column #2 shows the description of materials categories which are used in

the steel plant.

Columns # 3, 4&5 show the consumed quantity in a daily, monthly and

annually basis which calculated from consumption rate multiplying by the

number of days and production quantity.

Column #6 shows the movement of that material will be from where to

where, this will help the system designer to know the steps of handling and

link that with the traffic circulation to see is there are a traffic jamming

anywhere to avoid delays during handling of these items to storage areas or

from storage areas to production units, the aim is to have efficient and

effective handling system which must guarantee a smooth operation.

Column # 7 shows truck capacity from each item which will be used to

calculate the next column to have the number of trucks incoming each month

by dividing the consumption per month on the truck capacity.


Raw Materials Handling Flows.12Table

1 2 3 4 5 6 7 8 9

Index # DescriptionConsumption (ton)

Handling From-To Truckcapacity

# Of Trucks/Month Remarks

Daily Monthly Yearly

Raw Materials:

Scrap :

R-01 Imported Scarp 2,032 60,963 731,553 Main Gate - Open scrap yard 40 1524

Open scrap yard- Scrap bays 7 8709

R-02 Local Scrap 113 3,387 40,642 Main Gate - Open scrap yard 8 423

Open scrap yard- Scrap bays 6 564

W-01,02,03,10,11,12&

13Home Scrap 113 3,387 40,642 Preparation Area - Scrap bays 10 339

Sponge Iron - Direct Reduced Iron (DRI) and Hot Briquetted Iron (HBI):

R-03 DRI/HBI 831 24,926 299,115 Main Gate -Storage yard 55 453

Storage yard- Hoper & Scarp bay 10 2493


Table 2.1 continued1 2 3 4 5 6 7 8 9





Carbon:

R-03

Carbon Charge 50 1,500 18,000 Main Gate -Scrap bay 52 29

Carbon Foamy Slag 23 675 8,100Main Gate – Warehouse

50 14

Carbon Ladle 1 16 196 25 1

Warehouse - Production units 6 3

Lime Stone:

R-03 Lime and Dolomite 600 18,000 216,000 Main Gate - Storage yard 40 450

Alloys:

R-03Ferro-Alloys 22 668 8,010 Main Gate –Warehouse 35 19

Warehouse -Production units 6 111


.1 continued2Table1 2 3 4 5 6 7 8 9

Index # Description Consumption (ton) Handling From-To Truckcapacity



Slag Builder:

R-03Calcined Bauxite 1 24 288

Main Gate – Warehouse50 1

Calcium Aluminate 3 85 1,022 50 2


Graphite Electrode:

R-04 Electric Arc and LadleFurnaces 8 252 3,024 Main Gate-Warehouse 29 9


Refractories:

R-04 Electric Arc Furnace,Ladles and Tundish 32 964 11,574 Main Gate-Warehouse 43 22


Mold Powder:

R-04 Mold and Tundish 2 62 1,861 Main Gate –Warehouse 40 2


.1 continued2Table

1 2 3 4 5 6 7 8 9





Other:

R-05

Operative Parts(Rolls,..) 4 48 1,300 Main Gate –Warehouse 20 2


Spare Parts 2 18 500 Main Gate –Warehouse 15 1


Chemicals & Lubricants 2 20 550 Main Gate –Warehouse 10 2

3,839 114,995 1,382,377Warehouse -Production units 6 3

15,426

Note: Yearly production = 900,000 ton Hot Rolled Coils & Lime plant capacity of 100,000 ton of Quick lime.


From Table 2.1 the following result are obtained:

Quantities to be handled to production line in a daily basis from all items are

3,839mt

Quantities to be handled to production line in a monthly basis from all items

are 114,995mt.

Quantities to be handled to production line in an annually basis from all items

are 1,382,377mt.

In front of each materials table shows the movement of each material once

arrive to the plant main gate until issued for production units.

Number of trucks which will be moved inside the plant to production line in

a monthly basis is 15,426 trucks.

3.1.1.2 By-Products Handling Flows:

Table 2.2 shows the following information:

Column #1 shows the index of generated By-Products which later will be

used as a code of handling procedures of those items.

Column #2 shows the description of generated By-Products from different

production units in the steel plant, these By-Products in the flat steel are

relatively the same as the long steel.

Columns # 3, 4&5 show the generated quantity in a daily, monthly and

annually basis which calculated from the generation rate per metric ton of

finished product multiplying by the number of days and production quantity.

Column #6 shows the movement of that By-Products will be from where to

where, this will help the system designer to know the steps of handling and

link that with the traffic circulation to see is there are a traffic jamming

anywhere to avoid delays during handling of these items to storage areas or

from storage areas to production units, the aim is to have efficient and

effective handling system which must guarantee smooth operation.


Column #7 shows truck capacity from each item which will be used to

calculate the next column # 8 to have the number of trucks used each day,

month or year by dividing the generation per day, month or year on the truck

capacity.


Handling FlowsProducts-By.22Table

1 2 3 4 5 6 7 8 9

Index # Description Generation (ton) Handling from-to Truckcapacity

# OfTrucks/Month

RemarksDaily Monthly Yearly

Meltshop (MS):

W-01 Scrap Dust 45 1,356 16,272 Scrap Yard - Preparation Area 10 136

W-02 Ingots,Tundish and LadleSkull 48 1,437 17,239 Meltshop - Preparation area 30 48

W-03 Slag 440 13,210 158,516 Meltshop - Disposal area 15 881

Disposal area-Local Market 50 265

W-04 Fume Dust ( Baskets &Silos) 43 1,281 15,373 Meltshop - Disposal area 10 128

W-05 Fume Dust CoolingChamber 18 533 6,390 Meltshop - Disposal area 10 53

W-06 Broken Refractories 16 489 5,865 Meltshop - Disposal area 6 81

W-07 Broken Electrodes 0.4 13 151 Meltshop - Disposal area 3 4

W-08

Fine Quik Lime 80 2,388 28,650 Lime Plant - Local Market 8 298Fine Lime Stone

84 2,527 30,326 Lime Plant - Outside Disposalarea 8 316


Table 2.2 Continued

1 2 3 4 5 6 7 8 9

Index # DescriptionGeneration (ton)

Handling from-to Truckcapacity

# OfTrucks/Month


Thin Slab Caster (TSC):W-09 Scales 35 1,059 12,708 HSM and TSC - Disposal area 12 88

Disposal area - Local Market 60 18

W-10 Crops (Head & Tail) 28 825 9,900 HSM and TSC - Preparation area 16 52

Preparation area- Scrap bay 10 83

Hot Strip Mill (HSM):

W-11Plates

70 2,100 25,200 HSM- Preparation area 25 84Eject Slabs

Preparation area- Scrap bay 10 210

W-11 Cobbles25 750.0 9,000 HSM- Preparation area 7 107

W-12,13 End Cut ,Sampling Station& Straps

Preparation area- Scrap bays 8 94

Utilities :

W-14

Skimed Oil 3 86 1,036 Production units - Disposal area 10 9Sludge form Dewatering

System 1 35 414 Production units - Disposal area 10 3

Sand from WTP Filters Production units - Disposal area


Table 2.2 continued

1 2 3 4 5 6 7 8 9

Index # Description Generation (ton) Handling from-to Truckcapacity

# OfTrucks/Month


Mechanical Roll Shop:

W-15Grinding Machine Much Rollshop - Disposal area

one bucket 1Grinding Machine Coolantwater Rollshop - Disposal area

General Wastes:

W-16

Wood 0.3 10 124 Production units - Disposal area 0.6 1

Indoor area-Local Market 7 1

Empty drums 0.2 10 122 Production units - Disposal area 1.5 1

Disposal area - Local Market 4 1

Scraped operative parts 4 108 1,300 Production units - WasteWarehouse 10 11

Total 941 28,217 338,586 2,974

Note: Yearly production = 900,000 ton Hot Rolled coils & Lime plant capacity of 100,000 ton of Quick lime.


From Table # 2.2 the following results are obtained:

Quantities to be handled in a daily basis from all items are 941mt

Quantities to be handled in a monthly basis from all items are 28217mt.

Quantities to be handled in annually basis from all items are 338587mt.

In front of each materials table shows the movement of each material once

generated until issued from the plant main gate or storage in the indoor area.

Number of trucks which will be moved inside the plant in monthly basis is

2,974 trucks.

Digits and information collected from table 2.1&2.2 will be one of the important inputs for the

system designer which will help him to have full understanding about number, description and the

flow rate and movement of those materials and generated By-Products which enabled him to put a

plan for designing the system.

2.3.1.3 Hold several internal review meetings:

Since handling of materials and By-Products have involvements from

different departments, so system designer has to hold a several meetings with

all involved parties (Production, maintenance, Administration, Environment,

sales, finance and safety) as well as all logistics sections.

The main purpose of that review meetings are to define the responsibilities,

documents needed if any, the start point, end location, the best specifications

of recycled home scarp, these information help him to build an efficient and

effective system during implementation.

These meeting create common understanding, team work and to avoid conflict

during implementation.


2.3.1.4 Internal Material Handling Supply Chain Design (Hidden Supply Chain):

Based on the collected information given in Table 2.1& 2.2 I started to design

flow chart for each category which defined clearly process, used documents and

the responsibility, see as an example Figures 2.6 which shows the general

material handling flow chart , Figure 2.7 which shows scrap handling flow chart,

Figure 2.8 which shows scrap dust handling flow chart &Figure 2.9 which shows

meltshop slag handling flow chart as follows:


N o

O k

N o

O k

N o

Y e s

N o

Y e s

No

In te rn a l M a te r ia l H a n d lin g S u p p ly C h a in in S te e l P la n t

S t a rt

M a t e ria l c o m in g in t o g a t e

G iv e T ru k e n t ra n c e N o .

T ru k w e ig h in g w it h lo a d

P re p a ra t io n

G u id e T ru k t o S p e c if ie da re a

U n lo a d in g /L oa d ing

N e e dP re p a ra t io n

T ra n s p o rt in g t o B u nk e rso r S t o ra g e

T ra n s p o rt in g T oP ro d u c t io n U n it

W a s t e

T ra n s p o rt in g T o in d oo r a e ra

G o o dP ro d u c tio n

S t o p

M e t a lic

T ra n s p o rt in g t oP re p a ra t io n a re a

W e ig h in g

P re p a ra t io n

S e c u rit y

S e c u rit y

S e c u rit y

M a t e ria l H a n d lin g

W e ig h b rid g e T ic k e t

T ra n s p o rt in g T o o u ts id ed u m p in g a e ra

In s p e c t io n

W e ig h w it h o u t la o d a n d g o

P la n t U n it sre p re s e n t a t iv e

Figure 2.6 Internal Materials Handling Supply Chain in Steel Plant


No

Note:

11

12

Procedure Document Responsibility

1 - Security

R-01 - [ Scrap Handling Processes ]

2 - Security

3 - Stores (weigh bridge operator)

#

4- Mobile Equipm ent contractor with Supervision of Material Handling team

5- Mobile Equipm ent contractor with Supervision of Material Handling team


7 - Truck Driver with supervision of securety


9 - Security

10- Mobile Equipm ent Contractor Under Supervision of Material Handling team

- Metlshop Representative

13 - Melt Shop Representative

- Mobile Equipm ent Contractor Under Supervision of Material Handling team

- Metallic Inspection Com m ittee

Scrap Car Operator

14- Mobile Equipm ent Contractor under supervision of Material Handling team

15

- Logistic Dpt.; Material Control & Planning18

- Mobile Equipm ent Contractor under supervision ofMaterial Handling Team and operator according to MeltShop Manager instruction.

- The above procedure will be applied in the norm al condition- In Em ergency cases, gate have to enter any required Material in order to keep Plant running.

16

17

Truckcom e into gate

Give truck entranceNo.

Truck weighing withload

Unloading into scrapyard

Inspection

Truck weighingwithout load

Entrance Record:- Truck no.- Driver nam e- Material & Supplier

W eighing T icket:LG-W H RC 08

Vessels CheckScrap01MH RC-LG:List

Guide truck out sidethe plant

Segregation

Yes:Preparation

Charging bunkers

Classification

Needpreparation

W eighing

Record W eight

Charging sheet

Inspect if needm ore preparation

Cleaning by Magnet

W eighing with Dust

Cleaning Dust

No

Daily Stock Situation ReportLG-MC RC 02

Figure 2.7, Scrap Handling flow chart – (R-01)


2 - Sales Department- Financial Department

No

# Procedure Document Responsibility

1 - Mobile Equipment contractor with supervision ofmaterial handling team and by- products store keeper

W-01 -[ Scrap Dust ]

3 - Security


5- Mobile Equipment contractor withSupervision of Material Handlingteam and by-products warehouse store keeper


- Metlshop Representative

9 - Melt Shop Representative

- Metallic Inspection Committee

7 - Security

8

- Logistic Dpt.; Material Control &Planning

10- Mobile Equipment Contractor undersupervision of Material Handlingteam

11

14- Mobile Equipment Contractor under supervision ofMaterial Handling team according to Melt ShopManager instruction.


13

Collecting & pillingthe scrap dust

Give truckentrance No.


Scrap Inspection

Guide truck outside the plant

Yes:Preparation

Charging bunkers

Needpreparation

No:Weighing

Record Weight Daily Stock SituationReport

Weighing Ticket:

Inspect if needmore

Screening

Selling orScreening

Loading Truck

Truck weighing withload (Dust)

Selling

Screening

Cleaning Scrap byMagnet

ContractDelivery Notification

Figure 2.8, Scrap Dust Handling flow chart (W-01):


W-03 -[ Melt Shop Slag ]

4 - Security

5 - Stores (W eigh bridge Operator)

6- Mobile Equipment Contractor undersupervision of Material HandlingTeamand by-products warehouse storekeeper


8 - Security


13 - Mobile Equipment Contractor undersupervision of Material Handling Team

- Mobile Equipment Contractor Under Supervision of Material Handling Team.

- Mobile Equipment Contractor Under Supervision of Material Handling Team

- Logistic Dpt.; Material Control & Planning

- Melt shop Representative

- Mobile Equipment Contractor undersupervision of Material Handling Team.

- Sales Department -Financial Department

9

1

3

# Procedure Document Responsibility

12

2

10

Collecting of slag

Recording the weight &updating stock

Handling to scrap yard

Handling to specifiedarea

Inspect separatedMetal

Daily Stock SituationReportLG-MC RC 02

Slag ScreeningSpeerate Metal

W eighing Seperated MetalW eighing Ticket:LG-WH RC 08

Give truckentrance No.


Guide truck out

Loading Truck

Truck weighing with

ContractDelivery NotificationSelling Yes

No

No

Yes

Figure 2.9, Meltshop Slag Handling flow chart (W-03 )


2.3.1.5 Review the design:

After complete the deign of these flow charts a another review must be

done with all above mentioned parties and collected all their comments which

to be considered during updating of that design.

Repeating the review steps before and after to avoid conflict during

implementation.

2.3.2 System Implementation:

First step for implementation started with explanation of that design to all heads in

charge in the plant.

Second step is awareness for people who will apply that design.

Then apply the design with continuous site tour from material handling team to

monitor and explain the right way for application.

Upload the system in (IMS) Integrated Management System as a material handling

procedure.

This system can be applied in any steel plant after some adjustment based on its

steel products either long or flat.


2.3.3 System Results:

2.3.3.1 Revenue from sold by-products:

Application of the above mentioned system illustrated in Figures 2.6,2.7, 2.8 and

2.9 for internal material handling supply chain as a example (each item mentioned

in table 2.1 and 2.2 had a certain flow chart since inception to demise) leads to

generate revenues from sold items. Figure 2.10 demonstrate the revenues generted

from sold items and benefits which are summarized in the following:

Generate revenue of 43.6 million L.E in the period from year 2005 up to year 2009

which started with 961104 L.E in year 2005 and are growing in next years until

reach 14372187 L.E in 2009 based on upgrading of the system and understanding

of all parties the whole processes.

Save the costs of storage or dispose these by-products which included dumping

area in additional to transportation and administration costs.

Solve the problem of by-products completely by selling most of them to others

and use them as a raw material.

Evacuate plant areas first by first which improve the movement inside the plant

and utilize the storage areas in other activities.

Avoid the plant crises since accumulation of these by-products will lead

sometimes to create a fire and disturbances.

Help the surrounded society by opening a new windows of works for contractors,

who they hire people and help in solving the problem of unemployment.


Figure 2.10 , the revenues generted from sold items and benefits

2.3.3.2 Recycled home scrap:

Also application of the above mentioned system illustrated in Figures 2.6,2.7, 2.8

and 2.9 for material handling as a example (each item mentioned in table 2.1 and 2.2

had a certain procedure since inception to demise) leads to recycle home scrap in the

same plant. Figure 2.11 demonstrate the recycled home scrap since year 2005 up to

2009 and benefits which are summarized in the following:


Recycled of 227000mt of steel metal since year 2005 which means return its

value to cash flow and turn over again in the plant processes.

The value of these prepared home scrap is around 500 million L.E if we consider

the average scarp price is 2200 L.E.

Delaying in preparing of this home scarp means a big loss since for sure the plant

will need a new financial source which also means additional costs to pay interests.

From technical view point these scrap are known since it was produced by the

same plant and better to use them instead of buying from outside.

Figure 2.11, Recycled home scrap since year 2005 up to 2009 and benefits

Plant stoppage due tointernational economic

crises


So both figure 2.10 & figure 2,11 confirm the following:

1- Material handling system is a key activity in the steel plants.

2- By-products warehouse is essential for any plant such as other warehouses.

3- Application of designed system for material handling will lead to production cost reduction.

2.3.3.3 Photographs of some results:

Figure 2.12 clearly shows home scrap prepared and recycled in same plant and

Figure 2.13 (a) shows the processed slag which used in the cement companies as a

raw material and 2.13 (b) shows the metal seperated from slag which recycled in

the same steel plant.

Figure 2.12, home scrap prepared and make it ready to be recycled in same

plant.


Figure 2.13, a) photograph shows processed slag which used by cement companies

as a raw material, b) photgraph shows metal seperated which is ready to be recycled

in same steel plant

a)

b)


CHAPTER 3

Discussions and Conclusion3.1 Discussions

The objective of this research was to study the impact of logistics management in cost

reduction in the steel plants. To achieve this objective we started in chapter one by

general information about steel which answer some questions about what is steel, steel

inventor, steel making processes. Also flat and long steel meaning, meaning of Mini Mill,

steel worldwide production. Then the most steel makers, steel recycling and finally

different steel grades. This information gives understanding about steel industry.

After that we presented some information about the meaning of supply chain

management which included supply chain definition, steel making supply chain members

and flows which either “makes to stock production mode” or “makes to order production

mode”. Also the objective of supply chain management and its importance for business

success. This information gives understanding about supply chain management and its

role in business success.

After that we presented some information about logistics management which included

first the meaning of logistics management and its importance. Second the logistics

activities with some details about key and support activities. Third detailed information

about material handing in steel plant and by-products warehouse since mainly their

impact in cost reduction will be studied in details in this research. This information gives

understanding about logistics management.


Then we explained the difference between supply chain management and logistics

management. We ended up chapter one by information and photographs about

international treatment of steel plants’ By- Products. Also we explained slag processing

as an example. This information gives the reader some pre-understanding of recycling

processes and how international steel companies are dealing with their By- Products.

In Chapter two we explained research problem and showed the losses and disturbances

resulted from ignoring of clear internal material handling supply chain application and

By-Products warehouse. Then we illustrated the problem by some photographs which

showed clearly the existence of the problem in some steel plants.

After that we explained the steps of solving the problem starting from designing of

internal materials handling supply chain (hidden supply chain) which included collection

of information about raw materials and By- Products flows. Also we held several internal

review meetings with all involved parties. Based on collected information and results of

meetings we designed the internal materials handling supply chain. Then we reviewed

this design to insure smooth application and reduce errors. Then we applied the internal

materials handling supply chain with support of this application from materials handling

team. After that we showed the results gained from system application within five years.

These results are mainly 43.6 million L.E as a revenue from sold By-Products and

recycled of 227000mt of steel metal from home scrap with value of 500 million L.E in

case of scrap price is 2200L.E per ton. Also we explained that the value added is not only

come from the revenue generated. But also there are other benefits such as saving of


storage cost and interests of new finance. Some photographs shows the results are

presented in the last section of chapter two.

In this chapter we presented brief about the research and conclusion which shows clearly

that application of internal material handling supply chain and establishing of By-

Products warehouse will definitely lead to production cost reduction.

3.2 Conclusions and Recommendations

From this research the following conclusions can be drawn:

Understanding of the interfaces between supply chain managements is crucial

to have integration between all members which is essential for business

success.

Design internal material handling supply chain (hidden supply chain) before

application shows the processes, document and responsibility since arrival of

materials to plant gate until allocate each By-Products in a specific location is

the one of ways to achieve cost reduction.

Understanding of materials and By-Products flows is essential to design the

internal material handling supply chain.

Continuous monitoring and reviewing of the applied internal material handling

supply chain is essential to improve the efficiency and effectiveness of that

system, since the processes are dynamic.

Separating of each By-Product in certain location will facilities recycling or

selling of all By-Products.

By-Products warehouse is essential for any factory which organizes and

controls the flow of the generated By-Products and makes an official link with

other departments such as production, handling, finance, and sales.


Both handling section and By-Products warehouse will lead to have closed

cycle for receiving By-Products from production, maintenance or other

warehouses until recycle them by the same plant or sell to outside customers

which lead to improve the work environment and cost reduction.

Application of internal material handling supply chain leads to generate

revenue of 43.6 million L.E in five years as a result of sold items to external

customers.

Also application of that system leads to recycle 227000mt of steel metal in five

years which means return back 500 million L.E to steel plant cash flow in case

of scrap price 2200L.E per ton.

Cost reduction is not comes only from the value of sold or recycled By-

Products but also comes from saving of storage costs and avoiding of double or

triple handling of these items.

Cost reduction finally achieved through return back of cash flow leakages by

avoiding of materials losses and recycling or selling of the By-Products.

Material handling system is a key activity in steel plants.

Application of designed system for material handling and By-Products

warehouse will lead to cost reduction.


References

[1] Council of Logistics Management, http://www.clm1.org/mission.html, 12 Feb 98)

Council of Supply Chain Management Professional

[2] IESE Business School-University of Navarra , Mittal Steel: The making of the Worlds LargestSteel

Company (A), 2006.[3] http://www.worldsteel.org/pictures/programfiles/Fact%20sheet_Raw%20materials.pdf

[4] International Iron and Steel Institute, Top-30 Producers by International Iron Steel Institu5

July 2006.

[5] Sunil Chopra & Peter Meindl, Supply Chain Management Strategy, Planning & Operation –Third Edition,2007.

http://cyber.econ.pu.ru/downloads/alm_1_3.pdf]6[

[7] http://supplychain.ittoolbox.com/documents/logistics-vs-scm-17075

[8] ArcelorMittal web site http://www.arcelormittal.com

[9] Proceedings of 5th European Slag Conference 19th – 21st September 2007, LuxembourgEUROSLAG Publication No. 4.

http://www.clm1.org/mission.html

http://www.worldsteel.org/pictures/programfiles/Fact sheet_Raw materials.pdf

http://en.wikipedia.org/wiki/International_Iron_and_Steel_Institute

http://cyber.econ.pu.ru/downloads/alm_1_3.pdf

http://supplychain.ittoolbox.com/documents/logistics-vs-scm-17075

http://www.arcelormittal.com/