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NLMK Group, an international steel company with assets in Russia, the USA and the European Union, passed an audit of the Lipetsk site for compliance with the criteria of the Total Toyota Production System (T-TPS), one of the most effective production process management systems in the world.
The purpose of the audit was to assess the effectiveness of the NLMK Production System (NLMK PS) and obtain recommendations for its further development.
NLMK PS has been implemented at NLMK Group enterprises since 2013. The system includes a wide range of practical tools and techniques to improve the efficiency of production and business processes. Their use made it possible to achieve a positive effect on EBITDA in the amount of $477 million in 2014-2015, even taking into account the impact of negative pricing conditions.
The audit of NLMK PS for compliance with T-TPS criteria was carried out by leading experts from Toyota Engineering Corporation and the TPS Certification Center (Japan). The auditors checked the work of the blast furnace, steelmaking and rolling production departments, assessed the use of NLMK PS tools, analyzed the processes of supply, maintenance and repair of equipment, personnel training, labor protection and industrial safety.
The auditors noted that the level of development of NLMK's Production System exceeds the average level of global metallurgical companies. In the production sector, NLMK's assessment corresponds to the level of best practices of European and American metallurgical enterprises.
“Experts highly appreciated the use of the A3 tool by NLMK specialists to solve problems and the level of compliance with labor protection and industrial safety requirements. Separately, Toyota Engineering Corporation experts noted the effectiveness of efforts to achieve the company’s goals through the implementation of optimization programs. The auditors indicated ways to develop the system to reach the level of leaders - Japanese companies, for example, increasing the involvement of enterprise employees in the process of continuous improvements. We intend to include the recommendations in the NLMK Production System development program for 2016-2017,” commented Yulia Venza, Director of Operational Efficiency at NLMK.
Briefly about NLMK's production system
The NLMK Production System (NS NLMK) is a methodology developed by the Group’s specialists, which includes a wide range of both global and unique production practices aimed at increasing the efficiency of key production, technological and business processes. It is a constant, self-sustaining process of finding and implementing improvements. Full-scale and systematic implementation of PS at NLMK began in 2013.
Based on NLMK PS tools, programs to improve operational efficiency are being implemented. Thanks to the implementation of the Production System, NLMK Group has become one of the most efficient steel companies in the world.
Information about NLMK Group
NLMK Group is a vertically integrated metallurgical company, the largest in Russia and one of the most efficient producers of steel products in the world. NLMK Group's metal products are used in various industries, from construction and mechanical engineering to power equipment and offshore wind turbines.
NLMK's production assets are located in Russia, Europe and the USA. The company's steel production capacity exceeds 17 million tons per year, of which about 16 million tons are located in Russia.
NLMK demonstrates the most competitive cost among global manufacturers, and the company's profitability is one of the highest in the industry. The company's revenue in 2015 was $8 billion, EBITDA was $1.95 billion, and net profit was $967 million. The Net Debt/EBITDA ratio is 0.56.
Ordinary shares of OJSC NLMK are traded on the Moscow Stock Exchange (ticker “NLMK”), global depositary shares are traded on the London Stock Exchange (ticker “NLMK:LI”). The company has an investment grade credit rating of BBB-.
Additional information about NLMK Group on the website www.nlmk.ru
Information about Novolipetsk Iron and Steel Works
Novolipetsk Iron and Steel Works is the main production site of NLMK Group, Russia's largest producer of steel and metal products with high added value, one of the most efficient metallurgical companies in the world. The plant is the core of a single international production chain of NLMK Group with assets in Russia, the EU and the USA.
The volume of steel production at the Lipetsk site is about 18% of all steel production in Russia and about 80% of all steel products of NLMK Group. NLMK's high-quality metal products are used in various strategically important sectors of the economy, from construction and mechanical engineering to the production of power equipment and large-diameter pipes. At the end of 2015, the volume of steel production at the main production site of NLMK Group reached 12.9 million tons - the maximum figure for more than 80 years of operation of the plant. Steel output at 100% utilization of steelmaking capacity increased by 2.4% compared to the previous year. Record figures were achieved at all stages of the Novolipetsk plant.
Following the old tradition, I present information materials published by client companies. The NLMK Company magazine came into my hands, with a number of interesting articles. I bring to your attention the first of them - an interview with the head of the NLMK production system development department.
NLMK Group is recognized as the most efficient steel company in the world. The key to global success was the implementation of a set of programs to improve operational efficiency within the NLMK Production System. Ekaterina Eletina, Head of the NLMK Production System Development Department, talks about what has been done and what remains to be done.
1. When and how did the implementation of the Production System begin at the Lipetsk site?
Work in this direction began back in 2009. The introduction of new approaches was carried out from the production sector - from where the main added value is created and where the largest reserves are hidden. We started with improving quality, stabilizing technology, and increasing equipment reliability. Then, as the system developed, the area of distribution expanded, the consciousness of enterprise personnel was transformed, and new approaches became “our method of work” for people. Currently, the NLMK Production System covers the key enterprises of the Group: NLMK, VIZ-Steel, Stoilensky GOK, Altai-Koks, NSMMZ, NLMK-Kaluga. NLMK Pennsylvania takes an active part in the application of new approaches.
2. What challenges are you facing this year?
This year, the main tasks of the NLMK Production System are the horizontal and vertical dissemination of knowledge (training personnel of various levels of competencies) and their consolidation, as well as the autonomous functioning of the Production System tools.
Training in new principles and tools continues, both with the involvement of external consultants and trained “internal trainers” of the enterprise. In total, to date, including training by internal trainers, more than 10 thousand NLMK Group employees have been trained.
As for consolidating new approaches, we strive to ensure that the system is self-regulating and does not require “manual control.” This will ensure its sustainability in the future. Last year, for this purpose, production efficiency improvement departments were created in the divisions, subordinate to the directors of the areas. The most proactive employees from workshops and production were selected for the departments, who became conductors of new approaches and the driving force of change.
This year, a complete diagnosis of the functioning of the Production System is being carried out by conducting audits in the sintering, steelmaking and rolling industries. During the audits, the main problem areas and further development of the system were identified.
3. How effective are the Production System tools? 
If we summarize the interim results of using the tools of the NLMK Production System, more than 130 A3 projects are currently being implemented, aimed at achieving target levels for equipment downtime, non-conforming products, material consumption, and energy. More than 60% of ongoing projects achieved their target levels as of July 2014. The leading indicators in terms of project efficiency are achieved by steelmaking and repair production - more than 75%. The cost reduction effect from the implementation of a set of programs to improve operational efficiency, based on the implementation of the NLMK production system at all Group sites, amounted to $235 million in 2013 compared to the 2012 level, in the second quarter of this year - $63 million compared to the 2013 level .
New approaches became “our way of working” for people
4. Which tools are developing most actively?
The direction of mapping repairs and technological operations is actively developing. In July, based on the results of mapping, a number of measures were developed to optimize the duration of technological operations and scheduled repairs without deteriorating quality by 10–20%. This frees up additional time for the production of metal products.
The direction of activating production personnel is being developed. Thus, in the production of cold rolled products at the polymer coatings site, thanks to the increased attention of the department’s management, informing staff about existing problems and methodological support of departments for increasing the efficiency of rolling production, in July, workers of the working professions developed 10 initiatives - proposals aimed at improving product quality and ensuring stable operation equipment, reducing the consumption of raw materials.
It is important to note the expansion of the NLMK Production System not only to the main production facilities, but also to the functional areas of the enterprise, such as logistics, energy efficiency, and occupational safety and health. For example, the Directorate for Operational Efficiency and logistics services are jointly implementing a project to optimize the duration of stay of rolling stock on NLMK territory. The goal of the project is to reduce the volume of work in progress. According to preliminary estimates, reserves for reducing the duration of transportation of finished products within NLMK amount to up to 30%.
5. What ideas and principles of lean manufacturing are NLMK primarily focused on?
First, I still want to clarify that the NLMK Production System does not copy any of the existing production systems, be it LEAN, 6 Sigma or something else. We select the principles and tools of the world's leading enterprises that are most suitable for solving specific problems in a given situation, and adapt them to the conditions of the Group of Companies. As for the principles of the Production System, similar to the LEAN philosophy, these are, of course, transparency and objectivity of the information used, continuity of improvements, consistent identification and elimination of all types of losses and, most importantly, the involvement of personnel at all levels and areas of activity in joint problem solving.
6. Is it difficult to promote the Japanese system at a Russian enterprise? Still, you can stumble upon misunderstandings.
We are not introducing the Japanese system, but its principles, adapted to work at our enterprise. Regularly receiving feedback from the workshops, we, of course, know that there is some misunderstanding. After all, in any team there will always be optimists who believe in the success of changes, and pessimists who are ready to blame a certain “Russian mentality” for failures. But with the experience of successful projects, people’s attitudes gradually change, they begin to believe in the effectiveness of our methods and develop a desire for improvement.
We are not introducing the Japanese system, but its principles.
7. One of the main principles of the Japanese system is continuous planned improvement in small steps. How, in your opinion, is this better than global and drastic changes? Can you give an example in which NLMK service would this be most noticeable in terms of efficiency?
It is impossible to say unequivocally what is better: revolutionary changes with a quick effect or evolutionary ones with a stable effect in the long term. It all depends on your specific goals. However, in my opinion, sudden changes can cause misunderstanding and rejection among people. The production system is slowly but surely changing the psychology of people and making the process of continuous improvement the “formula of life.”
8. Some experts believe that the form of submitting initiatives is reminiscent of the good old system of innovation at industrial enterprises in Soviet times. Is it so?
Yes, this procedure really resembles the Soviet system of innovation. However, our version of submitting initiatives is simpler in terms of design and faster in terms of encouragement. Each employee, having an idea for improvement, can fill out a one-page form in the shift meeting room and submit it to the department's technical council for consideration. If the council approves the initiative, then the reward will be up to 2 thousand rubles. You can receive it immediately – just for submitting an offer. If the event subsequently has a positive effect, the employee will receive an additional remuneration of about 10 thousand rubles.
In any team there will always be optimists who believe in the success of change.
9. It is believed that it will take 5–6 years for the system to spread to all production. Will this be justified in the current environment, when market conditions change every quarter?
A radical restructuring can be quick if we give priority to such tools of the Production System as A3, mapping, and the introduction of new materials. To achieve a lasting effect, each new change must become a “way of thinking” and a “method of work.” 5–6 years or even more is a normal period for the formation of “new habits” and the integration of a new philosophy into production.
10. A certain effect has been achieved, but it must not only be preserved, but also developed further. What else needs to be done to make the system work?
For 2015, it is planned to further transfer the principles and tools of the Production System to all the main processes of the Group’s enterprises, define functionality within each main area of activity to improve efficiency, and adapt efficiency improvement tools to the specifics of the areas. Further coordination of the Production System with the budgeting process will continue.
As for the long term, our main goal, of course, is to make the company truly efficient: to make customers, shareholders and employees of the company happy.
Interview: Natalia Sviridenko, Yana Larina
3 facts about the NLMK Production System
- the implementation of the Production System is one of the factors that helped NLMK Group become the most efficient steel company in the world;
- in the second quarter of 2014, the cost reduction effect from optimization programs at all Group sites amounted to $63 million compared to 2013;
- More than 10 thousand NLMK Group employees were trained in the principles of the Production System, including training by internal trainers.
Reprinted with permission from the publication: “NLMK Company”, corporate magazine of the NLMK Group of Companies, No. 5-6 (48) November-December 2014.
To whom it may interest
NLMK Group, an international steel company with assets in Russia, the USA and the European Union, passed an audit of the Lipetsk site for compliance with the criteria of the Total Toyota Production System (T-TPS), one of the most effective production process management systems in the world.
The purpose of the audit was to assess the effectiveness of the NLMK Production System (NLMK PS) and obtain recommendations for its further development.
NLMK PS has been implemented at NLMK Group enterprises since 2013. The system includes a wide range of practical tools and techniques to improve the efficiency of production and business processes. Their use made it possible to achieve a positive effect on EBITDA in the amount of $477 million in 2014-2015, even taking into account the impact of negative pricing conditions.
The audit of NLMK PS for compliance with T-TPS criteria was carried out by leading experts from Toyota Engineering Corporation and the TPS Certification Center (Japan). The auditors checked the work of the blast furnace, steelmaking and rolling production departments, assessed the use of NLMK PS tools, analyzed the processes of supply, maintenance and repair of equipment, personnel training, labor protection and industrial safety.
The auditors noted that the level of development of NLMK's Production System exceeds the average level of global metallurgical companies. In the production sector, NLMK's assessment corresponds to the level of best practices of European and American metallurgical enterprises.
“Experts highly appreciated the use of the A3 tool by NLMK specialists to solve problems and the level of compliance with labor protection and industrial safety requirements. Separately, Toyota Engineering Corporation experts noted the effectiveness of efforts to achieve the company’s goals through the implementation of optimization programs. The auditors indicated ways to develop the system to reach the level of leaders - Japanese companies, for example, increasing the involvement of enterprise employees in the process of continuous improvements. We intend to include the recommendations in the NLMK Production System development program for 2016-2017,” commented Yulia Venza, Director of Operational Efficiency at NLMK.
Briefly about NLMK's production system
The NLMK Production System (NS NLMK) is a methodology developed by the Group’s specialists, which includes a wide range of both global and unique production practices aimed at increasing the efficiency of key production, technological and business processes. It is a constant, self-sustaining process of finding and implementing improvements. Full-scale and systematic implementation of PS at NLMK began in 2013.
Based on NLMK PS tools, programs to improve operational efficiency are being implemented. Thanks to the implementation of the Production System, NLMK Group has become one of the most efficient steel companies in the world.
Information about NLMK Group
NLMK Group is a vertically integrated metallurgical company, the largest in Russia and one of the most efficient producers of steel products in the world. NLMK Group's metal products are used in various industries, from construction and mechanical engineering to power equipment and offshore wind turbines.
NLMK's production assets are located in Russia, Europe and the USA. The company's steel production capacity exceeds 17 million tons per year, of which about 16 million tons are located in Russia.
NLMK demonstrates the most competitive cost among global manufacturers, and the company's profitability is one of the highest in the industry. The company's revenue in 2015 was $8 billion, EBITDA was $1.95 billion, and net profit was $967 million. The Net Debt/EBITDA ratio is 0.56.
Ordinary shares of OJSC NLMK are traded on the Moscow Stock Exchange (ticker “NLMK”), global depositary shares are traded on the London Stock Exchange (ticker “NLMK:LI”). The company has an investment grade credit rating of BBB-.
Additional information about NLMK Group on the website www.nlmk.ru
Information about Novolipetsk Iron and Steel Works
Novolipetsk Iron and Steel Works is the main production site of NLMK Group, Russia's largest producer of steel and metal products with high added value, one of the most efficient metallurgical companies in the world. The plant is the core of a single international production chain of NLMK Group with assets in Russia, the EU and the USA.
The volume of steel production at the Lipetsk site is about 18% of all steel production in Russia and about 80% of all steel products of NLMK Group. NLMK's high-quality metal products are used in various strategically important sectors of the economy, from construction and mechanical engineering to the production of power equipment and large-diameter pipes. At the end of 2015, the volume of steel production at the main production site of NLMK Group reached 12.9 million tons - the maximum figure for more than 80 years of operation of the plant. Steel output at 100% utilization of steelmaking capacity increased by 2.4% compared to the previous year. Record figures were achieved at all stages of the Novolipetsk plant.
Traditionally, the most active users of IT are retail, telecom and financial enterprises. However, companies in the metallurgical sector, being one of the main exporters in our country and therefore competing with the world's leading players in their industry, are obliged to maintain business management systems at the highest level. About how IT is used for this in the NLMK group of companies, the largest steel producer in Russia, to the observerPC Week Sergei Svinarev said NLMK Vice President for Information Technology Vadim Uryas.
PC Week: What is NLMK? What are its unique features compared to other companies engaged in the extraction of raw materials and the production of metallurgical products from them?
Vadim Uryas: NLMK is an international company. Along with the main production site - the Novolipetsk Metallurgical Plant - it includes more than 20 factories in Russia, the USA and the European Union. Moreover, many are the largest in their region or the most modern or unique in their field. And this does not take into account dozens of Vtorchermet scrap collection sites and NLMK India service centers. The NLMK Group is the largest steel company in Russia: according to preliminary estimates, this year's production will be about 16 million tons of steel, of which about 13 million will be produced at factories in our country. We are also the leader in production cost per ton of metal, significantly ahead of foreign companies in this indicator.
NLMK is a vertically integrated company whose enterprises mine and produce all the necessary components for the production of rolled metal, with the exception of coking coal. Such enterprises include the Stoilensky mining and processing plant, which mines and processes ore, Altai-Koks, which produces coke products, Stagdok and Dolomit, which produce fluxes. From these raw materials, steel is smelted at the Novolipetsk plant, which is either rolled into rolled products there, or sent to our European and American (USA) enterprises for the production of finished products near the client. This chain allows us to ensure almost full utilization of our steelmaking capacities. And here’s what else distinguishes NLMK from other players in the Russian ferrous metallurgy industry: all of the mentioned foreign enterprises are integrated into the overall production chain and are fully managed by the company’s management. The group's foreign enterprises produce a number of unique types of rolled products that are in great demand on the world market, for example, for the manufacture of bases for offshore wind generators. In addition, the NLMK group of companies includes enterprises that produce fittings for the construction industry, and the VIZ-Steel company, which produces transformer steel - the most high-tech product in metallurgy, and together with NLMK occupies about 11% of the world market for this type of steel.
PC Week: What are the main challenges facing IT departments of companies in your industry? And are there any special specific tasks for the NLMK IT department? Is it involved in software development and system integration or is this activity outsourced?
V.U.: Each metallurgical company, of course, has certain specifics, but in general they all solve the same problems. The development of IT at NLMK is largely determined by the strategy initiated in 2008 to transfer all group companies into a single information space and centralize their information systems. Even the leading Western companies in our industry have not achieved such a level of centralization today. The goal is to create a unified management system for all enterprises of the NLMK group of companies based on the SAP ERP solution. To do this, some production facilities had to abandon legacy business applications and transfer them to a single SAP ERP deployed in a common data center. As a result, it was possible to halve the number of IPs used in the group. Today, all our Russian enterprises and a number of foreign ones are connected to the ERP system. By 2019-2020 It is planned to ensure that all enterprises of the group operate on the same ERP system and support uniform methodological principles regarding accounting and organization of business processes.
The MES-level production process management system is a different matter. Historically inherited products and systems are widely used here, but the ideas of digital business transformation that have emerged recently stimulate the creation of innovative solutions using big data technologies, stream processing, etc. At the same time, the centralization of such systems is similar to what is done in ERP , is impractical due to the high risk of stopping critical production cycles. Therefore, MES systems at our enterprises, even of the same profile, develop independently and differ from each other. Nevertheless, a certain unification of them would be useful, and now we are considering the possibilities of such unification. In particular, we are studying the concept of Smart MES, which involves not only a reactive management method, but also a proactive one, allowing one to predict events, forecast changes in product quality, etc. This concept assumes a completely different approach to working with data collected by various systems operating at different levels (process control system, MES, ERP).
PC Week: What key IT projects of NLMK in recent years could you highlight?
V.U.: Any project, before it starts, is preceded by a stage of discussion with business units, which must clearly formulate what problems it is intended to solve and what it will bring to the business. This is done in order not to produce systems that are not capable of providing significant results for the company and risk remaining unclaimed.
As part of the transfer of all holding enterprises to a single SAP ERP system that I mentioned, two years ago we migrated it to the high-performance in-memory platform SAP HANA, which allowed us not only to significantly speed up a number of processes, but also to implement the generation of individual complex reports (say, a report on the shipment of rolls), which we simply could not receive in the SAP system, based on the traditional Oracle disk DBMS. We also could not calculate the nomenclature of the repair department, which contains hundreds of thousands of items. By changing the platform, we received a whole range of capabilities that, under the previous platform, would have required radical technical re-equipment and the purchase of new hardware. A project has now been initiated to transition to the new generation ERP system SAP S/4HANA; its completion is planned for the first half of 2017. This transition does not require re-implementation, but is carried out as part of a standard technical upgrade for SAP.
Another important project is the implementation of a methodologically new approach to budgeting based on SAP ERP with the ability to simulate different scenarios and quickly recalculate options. The budgeting system has become more efficient and flexible. At the request of the sales departments, this year we implemented a new customer interaction management system, “Client Info,” which we built, which has significant differences from classic CRM systems. All clients have the opportunity to send us the necessary specifications and orders, as well as promptly receive all the necessary information and documents. The server part of the solution is based on Microsoft CRM, and the client part is our own development based on SharePoint. With the implementation of “Client Info”, the acceptance and processing of orders has noticeably accelerated. A similar system for managing interactions with suppliers is implemented based on SAP SRM (Supplier Relationship Management).
The information and analytical system put into operation this year is intended for the top management of enterprises, which allows monitoring the indicators of production processes at the workshop level (MES, transport, technological standards). It provides in real time all the necessary balances of raw materials, materials, capacities and gives a complete picture of production at the moment. So far, such a system has been implemented only at the Lipetsk site, but over time we want to extend it to all enterprises of the holding.
A statistical modeling system has also been created that makes it possible to control the quality indicators of finished products and predict them based on the characteristics of the initial raw materials (coal, coke, ore, pellets, etc.) and many other factors that indirectly affect product parameters. The system makes it possible to select batches of raw materials from those available in the warehouse to ensure the required level of quality of the final product. It is also possible to solve the inverse problem: selection of raw materials and operating modes that ensure the production of a product with predetermined desired properties and price characteristics. The main statistical algorithms were developed by Belgian specialists.
PC Week: What is NLMK’s IT budget and what is it mainly spent on? How has it changed in recent years? Does your company use IT outsourcing?
V.U.: We do not disclose absolute figures, but there have been no budget cuts in recent years. Our IT budget consists of three parts. The largest one is allocated for development programs (new projects) and on average amounts to 40% of the entire IT budget. This article increases from year to year, as the number of projects grows: in 2015 there were 25, this year - 50, and in 2017 about seventy are planned. The second part is allocated for maintenance programs: regular costs for infrastructure support, purchase of licenses, etc. Its share in the IT budget is relatively stable (about 40%), and in absolute terms it grows approximately at the rate of inflation. And the third part is operating costs, mainly employee salaries. Its share is about 20%.
If we talk about IT outsourcing in the classical sense, then we use it in the process of operating the SAP ERP system deployed on the infrastructure of the Viennese Atlas data center, which is supported and operated by a cloud provider and is paid by us monthly as a service with a given SLA level. Licenses for SAP ERP were purchased by us under a separate contract and paid in full. We purchase all other IT services (not related to SAP software) as a customer from a contractor on a project basis with clearly defined scope and deadlines.
PC Week: What areas are the responsibility of your IT department? Does it solve the problems of managing individual enterprises of the group and, in particular, issues of shop management and process control systems?
V.U.: NLMK Group enterprises do not have their own IT specialists. Although they may be physically on site, organizationally they report to a single IT department and cannot initiate any projects on their own. The IT department solves a wide range of tasks related to the operation of existing systems (except for production equipment and process control systems), their support and maintenance, development and implementation of new solutions. Of course, its resources are not enough for everything, so we attract external companies of various profiles. With a total group workforce of more than 55 thousand, our IT department employs approximately 700 people. Of these, about three hundred are responsible for communication systems, the rest are engaged in IT.
Over the past year, we have seriously begun optimizing our IT architecture, and this work is carried out only by our own specialists. And when implementing many projects initiated by business units, we use the resources of external consultants and system integrators. Since the number of projects doubles annually, and the size of the IT department remains unchanged, external resources are attracted more and more every year.
PC Week: Does NLMK have its own data center? Does the company use the services of cloud providers?
V.U.: I wouldn’t talk about the data center, but at NLMK’s Lipetsk site there is a modern, powerful computing center that makes full use of virtualization technologies. It operates all information systems with the exception of SAP business applications and systems, which for objective reasons are inappropriate to centralize and which are located locally at the holding’s enterprises. Our computer center has about four hundred servers installed, which, thanks to virtualization, form a private cloud.
PC Week: What are the company’s plans regarding the use of Internet of Things technologies (IoT)? How relevant is this topic for enterprises in the metallurgical industry?
V.U.: In principle, this topic is very interesting to us. We understand that this direction promises great benefits and therefore we are monitoring it and analyzing its possibilities. The limiting factor is the unpreparedness of most of the production equipment used for such technologies, but, for example, at our new pelletizing factory, equipped with modern technology, we plan to test such solutions. In particular, we are trying to build models to predict the timing of equipment maintenance and repair based on information collected in real time from a variety of sensors.
Today, the group is forming the “NLMK Strategy 2022”, and in accordance with it, Internet of Things technologies will take their rightful place in the section dedicated to creating a digital enterprise. Unfortunately, in metallurgy, even at the international level, today there are very few examples of IoT applications that we could use as reference.
PC Week: Does NLMK set itself the task of import substitution in IT? How can such tasks be stimulated - potential cost reductions or government economic policy?
V.U.: We do not directly set ourselves the task of import substitution. When considering the possible benefits of this, expressed in reduced costs, you need to carefully analyze all the advantages and disadvantages, as well as all the risks. In particular, along with the technical characteristics and price of products, the level of service and technical support provided by the vendor is also important to us. Unfortunately, not all domestic hardware and software manufacturers are today able to provide a competitive level in this regard. I hope it grows over time. Taking into account the possible risks, we are not ready for the widespread use of Open Source solutions.
PC Week: Thank you for the conversation.
Over the past few years, NLMK's production system has strengthened significantly. Your production efficiency improvement system (PEI), which was launched at NLMK in 2008, also achieved good results in a number of indicators. What exactly did you want to achieve with it? What prevented the Combine from achieving its goals before 2008?
According to the name, we wanted to achieve increased production efficiency, but without capital costs - by identifying internal reserves.
As for the obstacles to achieving efficiency goals, we were previously hampered mainly by the inertia of human thinking.
Today SPEP forms the basis of NLMK PS. Which parties were primarily affected by the implementation of the system? Why did the transformation begin with them?
The introduction of new approaches began in the production sector - where the main added value is created and where the largest reserves are hidden. We started with improving quality, stabilizing technology, and increasing equipment reliability.
- Please tell us about the mechanism for launching SPEP . Were specially created groups involved in implementation or was some other mechanism chosen?
The initial stages of implementation were the development of methodology and staff training. For these purposes, we have created the Office for Production Efficiency Improvement (UPEP). Development of new approaches was carried out on pilot projects at the stage of pilot-industrial operation under the leadership of UPEP.
After the final debugging of the procedures, they were transferred to industrial operation and their functioning was monitored through audits. The main mistake in our first steps, in my opinion, was the introduction of the system “from below” from the level of workers and foremen, and not “from above” - from the president and general directors.
Photo 1-2. Examples of implementation of the 6S approaches at NLMK OJSC
When was the Operational Effectiveness (OE) direction opened? What are the responsibilities of an OE manager?
- The direction was created in 2009. The main responsibilities of the head of this area are the development of documented procedures for the NLMK production system, adapting them to the conditions of the group's enterprises, training personnel in the procedures and principles of the production system during its implementation.
NLMK managers have repeatedly emphasized that tools within the framework of the implementation of the SPEP are selected depending on strategic goals and objectives. What would you say about the correspondence in this chain? What problems did you solve using certain tools? What are the results of the work?
NLMK's production system is not based on any one ideology (Lean, 6 Sigma, etc.), but selects and adapts the most appropriate best practices depending on the goal being pursued. For example, to stabilize technology and quality, we use control charts (quality control charts), to increase the “useful” operating time of equipment - timing and analysis of the causes of equipment downtime, to find ways to reduce costs - A3. However, there are no strict rules on the scope of application of a particular tool. In each specific situation, the optimal set of tools is sought.
As for the results, they can be illustrated using the example of the implementation of the A3 methodology. We began implementing this tool in February 2013 with the development of documented procedures, training of pilot testing personnel (Rolling production of NLMK OJSC was chosen as a pilot project). Then there was pilot industrial operation, spreading the approach to other areas of activity.
By September 2013, the economic effect from the implementation of A3 projects amounted to more than 1 billion rubles.
Photo 3-4.Work on A3 projects in the production facilities of NLMK OJSC
The SPEP program includes three main areas, among them - improving the system of key performance indicators (KPIs), as well as extending KPIs to the aggregate level. Could you give an example of cascading goals?
The cascading of goals can be illustrated with the following example.
One of the KPIs of the enterprise is the cost of production; KPI of the production director (for example, steel production) - non-conforming products and defects in the workshops of his competence; KPI of the workshop manager - non-conforming products and defects by type of product; KPI of the aggregate level (operator) - technology stability.
As for improving KPIs, this is the cornerstone of NLMK’s entire Production System.
Without constant work to involve staff in improvements, the development of PS is impossible. How do you lead it? How involved are NLMK staff today?
In order to engage, we have developed a system of both material and non-material motivation of personnel. Involvement is carried out through information, visualization of goals and objectives.
In 2013, line personnel submitted more than 450 initiatives to improve process efficiency, mid-level specialists implemented more than 130 A3 projects, and engineering and technical specialists implemented more than 180 projects as part of complex programs.
SPEP is intended not only for production - the system also concerns functional areas. What approach is used when extending the SPEP to other areas?
The Production System distribution process is not complete. It continues. The basic approach used here is as follows. The direction determines who is responsible for operational efficiency. If necessary, a group is formed to introduce new approaches.
Photo 5.Operational control of technology stability using control cards (IS "SPEP") at the workplace
There is a third direction in the SPEP program - the dissemination of the training system and the transition to the autonomous use of proven tools. What has been done to solve problems in this area?
A multi-level training system has been built. Top managers of enterprises are trained by external organizations (for example, Toyota Engineering Corp.). Middle management and future internal trainers are trained by involved organizations and UPEP. An important stage in the transfer of practical skills here is the internship of students at the UPEP. Masters and workers are trained by internal trainers.
As for the transition to the autonomous use of Production System tools, it is carried out after the implementation of all the implementation stages I mentioned above. An important step here is to secure personal responsibility for the use of proven practices.
Photo 6.Training fromToyota Engineering Corpon this topic"Universal management system" (Total Management System, TMS)
- What areas of efficiency improvement will be implemented in 2014?
The 2014 program is aimed at expanding the scope of implementation of the NLMK Production System, as well as the development and implementation of new tools.
- Why would you advise the heads of other enterprises to come to LIN Summit in Gelendzhik? What do you think will be useful for them?
The summit provides an opportunity to use the accumulated experience to reduce the time for implementing systems to improve operational efficiency. The question of the feasibility of this event is not even discussed.
