Managers in capital-intensive businesses like steel mills struggle with the cost of maintenance. Spend too much and they become uncompetitive. Spend too little and the cost of lost output outweighs the savings.
Russian steelmaker OAO Severstal took a different approach. Working with SAP Consulting, they used information technology to dramatically improve the effectiveness of their maintenance operations, and in doing so, drove down costs and boosted EBITDA. That's why Severstal is a finalist in the American
Metals Market (AMM) 2015 awards, competing in the “Information Technology Company of the Year” category.
Finding the optimum
In a steel mill maintenance is often one of the highest costs, drawing attention from all quarters of the business. Yet cut it back too far and the cost of lost
production, (missed sales,) skyrockets. Increasing the spend on planned and preventive maintenance lowers the cost of lost production and total costs, but
the relationship is not linear. Indeed, beyond a certain point, while lost production may continue to decline the total cost to the business increases.
Severstal took a different approach to production optimization. By increasing the “bang” for the maintenance “buck” their goal was to lower that inflexion point. That way, even if they hadn't precisely optimized maintenance costs, (which is virtually impossible in the real world,) they'd see increased mill output and lower unit costs. But how to start?
Problems in maintenance organizations
Despite intensive planning, much repair work is reactive. That's inefficient, disrupting scheduled activities, and increasing costs. Almost as bad, some PM comprises unnecessary checks and replacements: with more detailed historical data many of these could be avoided.
Record keeping and scheduling systems in maintenance organizations are often complex and cumbersome. Data entry is manual data entry and there are often multiple processing steps. (At Severstal some administrative tasks took as many as 12 steps to perform.) As a result records are often incomplete, and resources are used on the wrong things.
Maintenance process optimization
Working with Severstal, SAP Consulting launched a project they called “Mobile Plant Maintenance.” Aimed at dramatically improving maintenance effectiveness, this used a combination of hardware (RFID, mobile devices,) and software to automate administrative processes and improve planning and data capture.
Specific activities addressed included route generation and scheduling, equipment information, resource planning at both the rough-cut and detail level, inspection schedules, RFID tagging of equipment revision areas and the use of mobile devices to report on equipment condition.
Dramatic results
The project launched at Severstal's Cherepovets steel mill in September 2013 and took a total of six months. Reported benefits include:
- Simplified processes have freed-up time for more productive activities.
- Data is entered faster, so records are more accurate.
- Less downtime due to low quality maintenance (fewer repeat visits needed.)
- Four times less redundant plant maintenance efforts.
- Five times faster planning cycles and resource distribution with SAP Multi Resource Scheduling.
- 20% improvement of personnel operational efficiency
“Mobile Plant maintenance” is currently being used in two locations in the Cherepovets steel mill: sheet-rolling shop floor one and ferrous metal recycling.
Business improvement
Severstal's experience of using IT for maintenance process optimization illustrates the gains to be made by forward-thinking organizations. Rather than striving for the “right” level of maintenance, harnessing SAP's skills and tools helped them become more effective, in the process lowering costs and raising the return on assets. That's why Severstal is a finalist in the “Information Technology Company of the Year” category of the 2015 AMM awards.
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