Given the excess capacity challenge facing the global metals industry, many companies are struggling to achieve sustainable growth and are looking to trade protection to remain competitive. However, a few notable companies are evaluating potential earnings and utilization growth through the more effective, long-lasting approach of incorporating digital technologies into their businesses.
The difference? Basic survivor versus bold strategist.
Granted, it’s not necessarily easy to make investments in digital, especially since many companies aren’t earning their cost of capital. Every sector of the industry is facing pressure—to reduce operating costs, increase capacity utilization, sustain a price premium through superior customer service, innovate despite increased material competition, and maintain safe and secure operations. Many metals companies need to improve their EBITDA to revenue ratio to above 15 percent where they are earning their cost of capital—up from the 10 percent level where they’ve been stuck since the 2008 financial crisis.1
It’s time to break out of the below par earnings cycle without breaking the bank—and the strategic adoption of digital technologies will play a key role in addressing this challenge.
Changing the paradigm
Imagine a future in which digital technologies are widely adopted across all aspects of the metals industry value chain (see Figure 1). By the end of the next decade, flourishing companies will be data-driven and connected, with the ability to simulate and evaluate. Data ecosystems will connect producers, customers and suppliers with virtual control towers creating visibility into the supply chain—from suppliers, to a digitally controlled plant, to the outbound processors, logistics and end-customers.
Digital will also enable new ways of working across the company. Routine tasks, both manual and cognitive, are already starting to be replaced by digital technologies such as robots, video analytics and artificial intelligence. Workers conducting non-routine tasks will be increasingly enabled by digital as well. In the future, metals companies will have an unprecedented capability to apply the best expertise—human and machine—to respond to and anticipate issues and opportunities.
Applying digital components
To achieve this vision, companies will use a combination of digital mechanisms and devices, anchored by digital enablers and infrastructure. As shown in Figure 2, we categorize this approach into six groups—all supported by a central data resilience and security capability in the form of a trusted data layer, which connects the plant-level operating technology of process-level computers with the information technology enterprise-level systems.
The six groups are:
Analytics: Applied to “big data” collected from across the company to identify and correlate physical conditions that are creating certain outcomes, and to discover new patterns or innovate with metals processes. Artificial intelligence to support analysis and rapid decision-making sits within this group.
Connected “in the field” worker: Wearing devices (passive and active) to collect worker location and condition of surroundings in order to monitor safety and communicate with control centers. Workers can use active devices to receive work instructions or sequence activities, which will enhance productivity and support safe-work procedures. Devices can also communicate data back from the field.
Training: Using simulators and compelling content to help ensure consistent operations and practice important safety procedures in adverse operating conditions. An example would be drilling for an emergency shut down of a caster in response to a breakout.
Numeric data collection: Adding sensors to brownfield equipment to enhance the understanding of metals processes in real time and to guide equipment usage and proactive maintenance. Collecting this data will enable alerts if processes are outside of control limits or scheduled actions are not occurring as expected.
Visual data collection: Analyzing video from cameras placed around the plant (inside furnace, attached to cranes and drones) to discover patterns and conditions. This type of data is being coupled with “big data” analytics.
Remote/autonomous controls: Using self-guided vehicles to transport product between work stations or deploying robotic equipment to lift and manipulate metals pieces in fabrication. Control centers for multiple lines promote consistency of practices.
Exploring the art of the possible
How can new digital capabilities be used to address a company’s existing problems or create new opportunities? There may not be a “ready-made” solution when working in the brownfield. Often it will be best to develop a solution that addresses the specific situation or opportunity, which may require a combination of proven digital technologies.
To develop a path that works for your company, consider starting with these overarching steps:
Design roadmap: Create a roadmap by identifying potential digital technology initiatives and what will be needed to implement them. Recognize common enablers, prioritize the initiatives according to impact and complexity, and assign resources to explore those that are most promising. This step helps frame the art of the possible.
Conduct assessments: Based on the roadmap, conduct assessments to understand the most crucial areas for your company, which could include a manufacturing digital strategy, e-commerce potential or data security. These assessments will establish guidelines, and possibly constraints, for implementation or piloting the digital technology initiatives. Once the assessments are complete, it may be necessary to reprioritize which initiatives get done and when.
Implement and expand: Pilot the digital technologies in the prioritized sequence based on the roadmap. As the company gets acquainted with a more agile approach to development, it will grow in digital capabilities. Supplementing with talent from external sources specializing in digital technology transformation may be necessary in the interim or for ongoing operations.
In conclusion, there’s no doubt that the metals industry will be impacted by digital. And, according to research from the World Economic Forum and Accenture, that impact has tremendous value for the industry—specifically, cumulative value of US$130 billion by 2025.3 The question is, which companies will be the bold strategists and begin their digital journey now to help the industry unlock this trapped value.
1 Accenture Strategy analysis of steel company financial data extracted from Capital IQ, March 2017.
2 Accenture project experience.
3 “Digital Transformation Initiative: Metals and Mining Industry,” World Economic Forum, January 2017, http://reports.weforum.org/digital-transformation/mining-and-metals/ (accessed September 1, 2017).