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Five customer-focused steps to increase profitability in the steel industry

To be competitive, steelmakers should shift their priority to improving sales and operations.

Overview

With capacity and production volumes growing faster than demand, the global steel market has been changing from a sellers’ to a buyers’ market.

Low prices, product substitutions and China’s increased exports are all further contributing to steel industry volatility. Previously, steel producers looked to short-term fixes such as tactical cost cutting and asset restructuring, but that is no longer sufficient. Given current market dynamics, a long-term approach that aligns steel production with customer needs is required. Learn five ways that steel companies can become more customer centric in order to differentiate, improve profitability and be competitive.

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Five steps for profitability

Steelmakers must begin to see themselves as companies that deliver as promised to the needs of customers. In order to successfully master this paradigm shift to a customer-centric business strategy, steel producers should consider taking the following five steps:



Step 1
Step 1
Identify customer requirements under consideration of process volatility
Steelmakers can better fulfill customers’ plans by striving to understand their needs and communicating in a way that addresses those requirements. This focus on the customer leads to greater awareness of buying patterns across the steel value chain.
Step 1
Step 2
Understand the profitability range of products and services to reduce complexity
A steel company’s supply and production chain can be simplified by analyzing and limiting product customization. Profitability then improves due to the focus on customer needs and willingness to pay instead of production volume and utilization.
Step 1
Step 3
Segment customers based on service requirements and profitability
A multidimensional, needs-based approach to customer segmentation is key to boosting effectiveness and efficiency in sales. This includes offering bundled services to groups of customers based on their profitability and strategic importance.
Step 1
Step 4
Transform supply chains into highly reliable and agile ecosystems
Decoupling production at certain points in the supply chain creates reserved production capacity, which helps when orders change. In turn, this shortens lead times, decreases inventory levels and increases flexibility for the steelmaker and customer.
Step 1
Step 5
Adapt personnel, procedural and informational skills to facilitate the new approach
Defined roles and responsibilities as well as streamlined systems, data and processes are critical when moving to a new, integrated sales and production approach. In addition, planning ahead for a digital overhaul will help ensure future success.


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