Case Study On US Steel

Submitted To:- Submitted By:-Dr. Vinay Singh Amit Singh {MBA-03}

Milind {MBA-23} Kunal Wardhan {MBA-43}

Sushant Malhotra {MBA-44}

Case SummaryThe Backdrop• U.S. Steel (USS) is the largest integrated

steel producer in North America and the largest in the United States.

• Its third largest customer is the Ford Motor Company, an automobile manufacturer that requires an immense amount of steel.

• In 1996, Ford viewed USS as the worst in performance amongst its leading suppliers, and it threatened to turn elsewhere for its steel supplies despite their 70-year relationship.

Main problem• Ford's biggest complaint, among many, was

that it was not notified when its steel shipments would arrive, leaving Ford unable to operate efficiently.

Wakeup call• USS identified a number of challenges

beyond its notification system. - It knew it needed to lower production

costs. - Has to reduce number of hours per person

required to produce a ton. - Has to reduce costly size of its steel

inventory.

Analysis of the problem• Internally it needed to centralize

management of the various USS businesses and factories and their information infrastructures, which in 1996 were locally controlled.

• USS's major problems were reflected in its order-taking process. Orders were often manual, very imprecise, and filled with errors.

• Once an order arrived, USS was unable to track it during processing.

• One problem was that each processor had its own tracking and order systems, and each assigned its own inventory codes, making tracking impossible for USS.

• In addition, each processor communicated its processing data to USS over a dialup system.

• When the data arrived, they then had to be manually translated into a format that could be used by USS's own system before the information could be sent to the customer.

• This translation took about 90 minutes per message. It was a very expensive and inefficient system, and it left USS's customers without enough information for their own production planning.

• USS did send advanced shipping notices (ASNs) to customers notifying them of the arrival time, but the ASNs often arrived after the steel, too late to benefit the customers.

The Turnaround• USS moved rapidly to solve these problems.

One objective was to enable customers to enter orders electronically so that they would be accurate.

• Using the Web, customers now can specify the product, quantity, price, composition, size, thickness, and even delivery date for their orders.

• USS even connected Decision Express software from Live Capital to speed up credit authorization, enabling USS to reduce uncollectible debts while approving most orders.

• To track orders, USS developed an event-driven system that recorded each step in processing an order, automatically triggering the next step when the current step was finished, including the steps performed by the external processors.

• The new system even triggered ASNs and the delivery of the order. One benefit was that USS was able to handle processor messages in 12 minutes rather than 90.

• Both USS and the customers knew exactly where the supplies were and how the processing was proceeding. USS now found that when customer orders and ASN’s were correct, its customers were more likely to give the steel company repeat orders.

• USS replaced its order fulfillment system with i2 Technologies' Factory Planner forecasting software, which the programmers connected to their order system.

• They also connected three homegrown systems, including iTrac, which tracks orders as they go to processors or customers .

• An automatic order generation system for repeat customers called MIGS (Mechanical Item Generation System). MIGS reduced inventory by improving the forecasting of demand for finished goods at the customer's location.

1.Summarize US Steel’s current competitive situation?

After application of MIGS inventories have been reduced from 33,500 to 24,000 tons.

• U.S. Steel now keeps only 20 days of inventory on hand to meet demand, while it required 33 days of inventory on hand in five years ago.

• USS created a subsidiary called USS Engineers and Consultants(now called UEC Technologies)

• To provide technology and services developed by to USS to other steel companies.

• To maintain USS's competitive edge, UEC sells technology that is one generation behind what USS actually uses.

2. How are information systems related to the way U.S. Steel runs its business? What role is played by supply chain management systems? Information System is very much related to the

way USS runs its business as their whole system is centralized and keep on updating as the customer places orders. The specifications required by the customers are placed in their online orders. Tracking the order is easier. Revenue increases as the production increases. Significant role is played by supply chain management system by satisfying the customer needs and requirements.

3.What management, organization, and technology factors were responsible for USS's inability to compete with other steel manufacturers?Organizational Behavior• USS needed to lower production costs as well as

its steel inventory cost.• Order-taking process- Orders made was manual

and no information systems were used. In the due course of processing, the main problem was order cannot be tracked, due to which delivery is not on time

• Though the labor hours has lower down with the use of information system but it lead to increase in the labor cost (such as health care) as compare to other countries

Nucor and other innovative U.S. steel makers use scrap steel as inexpensive raw material forcing USS to make higher-grade steel from coal and iron, the type of steel used in automobiles and skyscrapers. Thus reducing its customer base.

Technical Problems• Since no. of processor was more & each

processor assigned their own inventory codes, which created complexity while tracking the order.

• This manual translation of data made the system very expensive and inefficient .

• Advanced shipping notices (ASNs) to customers (to inform the arrival time) by USS failed as they used to arrive after the steel reached the plant.

• For ex: Some Ford plants are only 20 minutes away from the processors. If a truckload of steel arrived without an ASN, Ford employees would have to record the delivery information manually, which required excess labor with the possibility of human errors.

Management Problems1. USS need to centralize the management of

the various USS businesses and factories and their information infrastructures.

2. Location : In 19th & early 20th centuries many U.S. steel companies has located themselves near the source of iron & coal so as to lower down the cost

3. USS wanted to combine with mini mills such as Bethlehem Steel, National Steel, and maybe even Weirton Steel only if the government takes the $10 billion of their cost of benefits providing the staffs with pension and medical schemes.

4. Describe how USS has responded to its global and American competition.

• USS implemented an information system that helped them to generate revenue by satisfying their customers.

• They started giving their technology to their sub divisions but the technology provided is at one stage lower level then USS.

• USS keep on updating their technology regularly.• Implementing information system decreased

their production cost.

5. How helpful were information systems in addressing USS problems?• As the customers enter order using internet

it’s easier to create a database for what are the specifications required by the customers like product, quantity, price, composition, size, thickness and delivery date.

• USS connected Decision Express software from Live Capital for the financial purpose and authorizing the orders.

• To track orders USS developed an event driven system.

Event Driven System

• USS replaced its order fulfilment system with i2 Technologies' Factory Planner forecasting software, which the programmers connected to their order system.

• They also connected three homegrown systems, including iTrac, which tracks orders as they go to processors or customers and an automatic order generation system for repeat customers called MIGS (Mechanical Item Generation System).

• MIGS reduced inventory by improving the forecasting of demand for finished goods at the customer's location. When MIGS was first used, it reduced inventories from 33,500 to 24,000 tons. The system has been upgraded and is now called MOGS (Mechanical Order Generation System).

• U.S. Steel now keeps only 20 days of inventory on hand to meet demand, while it required 33 days of inventory on hand in five years ago.

• This whole system is known as Continuous flow manufacturing.

Continuous Flow Information

Thank You