Over the past decade and longer, the steel industry has faced stormy weather. Dark clouds have continued to appear on the horizon, creating choppy waves and headwinds that prevent steel companies from establishing a path of growth and sustained profitability. The most recent dark cloud is the tariff situation on steel products, which will likely create additional trade imbalances and unwanted pressure on manufacturers—appearing just when there was some increased optimism around a recovery in the future growth of steel, particularly in Europe.
In addition to the obvious economic and market factors, steel companies also struggle with increasing supply chain network complexity, driven in part by globalization and the growing use of external subcontractors as part of their chain of manufacturing operations.
For example, for automotive steels, there is frequently a multi-tier network of downstream processers (subcontractors), performing galvanizing, cutting and other finishing operations, prior to delivery of the final product to the automotive customer. Overlaying this are consignment stock models, requiring the steel company to accurately manage inventory replenishments throughout the delivery network. This kind of scenario impacts many business processes, including order-to-cash, sales and operations planning (S&OP), subcontracting and production execution.
Currently, this type of business model means that many companies have a relatively opaque view of orders and materials. As such, they face a variety of challenges like those listed below.
So, what can help here?
We’ve reached the point where many steel companies and their partners are using supply chain technology: ERP, planning and optimization, transportation and warehouse management, etc. This makes a wealth of data available about every aspect of operations. In addition, new technologies have emerged that allow points along the end-to-end supply chain to be connected, regardless of the underlying execution platform. These cloud-based technologies are dramatically reducing the cost, complexity and time-to-value of inter- and intra-enterprise integration. And finally, advances in analytics are enabling companies to make effective use of this enormous amount of structured and unstructured data being collected and connected across the supply chain.
All these factors can be brought together in a “supply chain control tower” (Figure 1).
In short, a control tower is a cloud-based platform and set of capabilities, sitting on an enterprise data lake, that provides integration of supply chain processes and tools across silos via enhanced collaboration. The control tower includes an integrated framework of real-time visibility, root-cause analytics enabling rapid response and continuously improving process execution. Organized as a centralized shared service across the end-to-end supply chain, the control tower targets improvements in costs, inventory, quality, customer service and asset utilization. There are numerous examples of such control towers being successfully deployed in other industries, such as chemicals, oil and gas, and aerospace.
Implementing a control tower can be managed incrementally over time as a steel company matures in its thinking and capability. For example, the company could start with providing visibility to events and a focus on preventing disruption, and then move to supporting cross-function decision-making, basic “what-if” analytics and managing functional key performance indicators (KPIs). As maturity develops, it could move to driving continuous value and process improvements, leveraging complex analytics to optimize end-to-end business value and profitability.
For example, Accenture has worked with a leading steel company to implement a control tower approach in support of their supply chain planning processes—creating a mechanism to control the supply chain with the objective of improving the defined business KPIs through enhanced visibility, root-cause analysis and what-if scenarios. Initial target estimates were set at increasing on-time and in-full order fulfillment by 5 percent, reducing days of inventory by seven days and reducing production lead-times by five days.
The availability of new cloud platforms is playing a key role in enabling control towers to be deployed quickly and at low cost—integrating to existing ERP, transportation management and supply chain planning systems, as well as external suppliers and subcontractors. The platform then incorporates appropriate technologies to provide data aggregation, alert classification, simulations, workflow management, visualization and reporting.
In summary, a control tower approach can clearly play a powerful role in shining some light into the darkness for steel companies—serving as a way to enable business orchestration and support future business model innovation. This will provide some welcome relief in an industry that will increasingly need timely and accurate information across the end-to-end supply chain to remain competitive.