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Pakistan Steel Mills Operations Engineering Essay

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After independence in 1947, it did not take long for Pakistan to come to the realization that progressive industrial and economical development would be impossible without the possession of a self reliant iron and steel making plant. The dependence on imports would cause serious setbacks to the country along with an extortionately high import bill which would be impossible to support.

The initial idea for a domestic iron and steel mill was put forward in the first five year plan of Pakistan (1955 - 1960). Debates over the manufacturing process, supply sources of the requisite machinery and raw materials, plant site, domestic ore versus imported ore, ownership pattern, product mix and above all foreign financing credit kept the project on hold for a considerable time.

In 1968 besides other factors, it was considered by the Government of Pakistan that a basic steel industry should be established in the public sector, as public sponsorship of the project would enable integrated development of the steel industry in the country. As a result on the 2nd of July, 1968 Pakistan Steel Mills Corporation was setup as a private limited company in the public sector in accordance to the Companies Act of 1913, with the objective to establish and run steel mills at Karachi and other places in Pakistan. Pakistan Steel Mills Corporation (PVT) LTD. Foundation Stone laid on 30th December, 1973 Foundation Stone Laid By Zulfiqar Ali Bhutto (Shaheed) Prime minister of Pakistan.

Location: Production Plant 40 km East of Karachi

Capacity: 1.1 Million Ton of Steel Expandable up to 3.0 Million Ton per annum.

Main Product:

Cast

Bloom

Cast Billet

Customers

Suppliers

Business Strategy:-

Our goal is to become the leader in longer segment of steel catering to the constructions company.

Purpose:-

Pakistan Steel Mill Company wants to become the leading steel manufacturing company in Pakistan by offering high quality steel products to its customers in an innovative way.

The steel mills of Pakistan focuses on the present and future needs of its customer, maintaining the productivity and quality of its products as to fully satisfy its customer. The business strategy of the steel mills includes motivating the employees through the use of empowerment and rigid consequences. It ensures that it provides safe working and environment friendly conditions. Lastly the strategy also wants the company to fulfill its social obligation and be ethically responsible(http://www.paksteel.com.pk/).

Operational Strategy:

Definition of OS

Operational strategy specifies the means by which operations implements the firm's business strategy. Basically, operations strategy links long and short term operations decisions to corporate strategy. In order to carry out the operations efficient there has to be an effective cross-functional communication among the departments.

Core Competencies

They are the unique resources and strengths that an organizations management considers while formulating a strategy. Pakistan Steel Mills core competencies lie in its:

Workforce: Pakistan Steel Mills has the privilege of having skilled workforce which includes qualified engineers, experienced management, dedicated staff and motivated labor.

Facilities: The primary advantage that PSM enjoys is their location of the plant in Karachi and offices in major provincial hubs.

Market and financial know how

Technology: Pakistan steel mills production plant has the capacity to fulfill its current customer's demands and has the ability to cater future needs.

Competitive priorities.

Operating advantages must be related to each of the firms. We call these competitive priorities. Now, we would focus on PSM competitive priorities for processes which relates to the product or services itself.

Quality: To provide customers with superior quality billet. Fine iron ore should be used in which impurities are minimized. International standards should be met regarding the products. PSM uses 'blast furnace extraction' method instead of 'direct reduction method'. This method is relatively expensive. But, the final product contains less percentage of impurities as compared to the later one. To make products that are durable and will be able to handle maximum pressure. Strive to work and provide consistent quality so that the product meets the design specifications. Staff is helpful courteous, friendly and helpful in dealing with the customers. Quality should not only be limited to plant activities alone rather implementation of quality management systems across the whole organization. 

Speed: to finish and deliver the required orders on time. Making sure it takes the least time to finish a process. Work on reducing cycle time and through-put time. Since the plant is near the port hence it's easier to transport the raw materials to the plant swiftly with minimum cost. The time between customers placing an order of a particular specification and receiving it kept to a minimum.

Dependability: mainly raw materials are imported, so PSM has to make sure they get these RM on time so that there is no halt in the production process. To deliver the order on the specified date.

Flexibility: SMP uses 'blast furnace extraction' method. This technique uses coal as fuel which is expensive. In case, the coal is not available then they can use the technique of 'direct reduction iron' method. Also, sometimes they use scrap of ships as raw material instead of iron ore. Because, sometimes the ore is expensive.

Cost: At SMP the major cost is incurred on raw materials, their transportation and on the maintenance of the plant and equipment. The second portion of cost is allocated staff. Since, R&D department is not very efficient. Hence, minimal amount of cost is allocated to it.

The Types Of Operating Process

The operating process used in the steel mills will be categorized according to the volume of their output. The variety of the output is only limited to few products, the variation dimension remains the same because the demand does not vary according to the customers need, but the production remains the same throughout the year. The degree of visibility is obviously very low since the customers don't actually go to the steel mills to see the production.

The Transformation Process Model

Input Resources

Input transforming resources

Facility:-

Sintering

Coke Oven

Blast Furnace

Pig Casting Machine

Top Blown Basic Oxygen Furnace

Steel Pumping

Staff:-

Management, Administration and the labor force.

Input transformed resources:-

Material, information and customer are mentioned above in the introduction.

Transformation Process

Lump of iron ore and fluxes is inserted into blast furnace, then it is send to top blown blast oxygen furnace from there it goes to steel pumping and then its last location is continuous casting and from there it comes out as final product in the form of slab, bloom and cast billet. Coal is first send to coke oven from there the company gets some of its by-product and the rest of it goes through the same process to be converted into the final product. On the other hand fine iron ore has to first go through sintering and then rest of the process for fine iron ore is same as for the others to be converted into the final products.

Outputs

Output transformed resources are also mentioned above in the introduction.

Location

Every business is faced with the problem of deciding the best site for location of its plant or factory. Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory. Plant location decisions are very important for any business as it sets the foundation of the business to proceed for in its activities. It has a direct affect on factors like financial, employment and distribution, and transportation. This decision has to be very thoughtful because once the plant has been set out it cannot be changed very easily as it will incur substantial cost and time for the business. Hence at the start of any industry the company should generate several options for locating the plant, and after analyzing the best site is to be selected for the plant location. An ideal location would be one where the cost of the product is kept to minimum, with a large market share, the least risk and the maximum social gain.

In January, 1969, Pakistan Steel accomplished an agreement with V/O Tiajpro export of the then USSR for the preparation of a feasibility report into the establishment of a steel mill at Karachi. The foundation stone for this massive project was laid on the 30th of December, 1973. Initially location was decided as Kalabagh but due to certain geo-political factors it shifted. PSM now is strategically located 40km south east of Karachi in close locality to port Muhammed Bin Qasim. Pakistan Steel is a costal site which lies on the National Highway and is linked to the railway network. Spread over an area of 18,600 acres (29 square miles) with 10,390 acres for the main plant, 8070 acres for the township and 200 acres for the water reservoir.

The major factors that led to the decision of this site were:

Transportation cost: As most of the raw material for the steel mill was imported from abroad it was very difficult to transport the raw material to the plant as it contributed a lot to the cost. So the PSM was located In close proximity to the port bin qasim as it significantly reduced the transportation cost.

The infrastructure also was a vital concern for PSM location as it needed facilities like power, water, disposal of waste etc.  As aluminum, steel, are power intensive and must be located close to the sites of power generation failing which the shortage of, or increase in cost of generating power may spell problems for their survival.

Labor skills and wages is another crucial factor when determining location. Plant location should be such that required labor is easily available in the area. Getting labor from outside is usually costly and it causes lot of administrative problems.  

Suitability of the land: Site selection should also take into account topography. The soil structure must be capable of bearing loads of foundations.  Though modern building techniques can overcome the limitations of the soil, but if considerable improvement is required then selection of a low cost and may ultimately turn out to be expensive.

Availability and cost of the land: PSM required huge portion of land to accommodate the production facilities and if necessary for expansion purposes.

Layout

Plant layout refers to the arrangement of physical facilities such as machinery, equipment, furniture etc. within the factory building in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processing the product from the receipt of material to the shipment of the finished product.

Pakistan steel mills are based on the concept of product layout. Under this, machines and equipments are arranged in one line depending upon the sequence of operations required for the product. The materials move from one workstation to another sequentially without any backtracking or deviation.

Advantages of product layout to PSM

Low cost of material handling, due to straight and short route and absence of

Back tracking.

Smooth and uninterrupted operations

Continuous flow of work

Lower cost of manufacturing per unit

Drawbacks of product layout to PSM

High initial capital investment in special purpose machine

Heavy overhead charges

Breakdown of one machine will hamper the whole production process

Lesser flexibility as specially laid out for particular product.

Capacity management

By this term it means dealing with fluctuation in demand, capacity can also refer to produce the work in a given time. How much good or services a company can provide depends on the capacity management of the company. The capacity management of the steel mills will be defined in terms of the tons of steel produced per day. PSM has got lots of resources and people at its disposal and if the company wants to it can increase its CM, but unfortunately the share of the PSM is only 20-25 % of the total industry due to certain other factors such as load shedding and the high prices of raw material. But if the company does not have to face load shedding and high prices of raw material then its CM can easily be improved since it's facing no problems at its end.

If the PSM wants to improve its CM it should firstly make an accurate demand forecast, the labor should be motivated and they should have the latest technology and equipment. On the other if it wants to manage its existing capacity then it should change its staff maybe, change the equipment or even introduce new methods.

Scheduling and control of resources

The problem of scheduling orders at each facility of a large integrated steel mill is considered. Orders are received randomly, and delivery dates (Due Dates sequencing) are established immediately. Each order is filled by converting raw materials into a finished saleable steel product by a fixed sequence of processes( scheduling orders in a steel mill). In the planning and scheduling, all the tasks beginning from the establishment of the project office to handing over of the Steel mill to the plant management were clearly worked out in detail, indicating the duration of each task, using raw materials on FIFO basis and the responsible person to accomplish the said task. There were about 20 major tasks, each having a detailed sub-task. The sub-tasks themselves again were scheduled further to sub-activities showing their duration, accomplishment and responsible person.

The critical path was: 

- civil works, 

- refurbishing and erection of mechanical parts of the mill, 

- electrical engineering tasks and 

- other utility works, specifically the mill central water cooling system.

The civil task has the following critical activities: 

- the designing part,

- Administration activities, 

- Maintenance of the re-heating furnace foundation and 

  smoke way with the refractory material lining.

Supply Chain Management and the Pakistan Steel Mill: Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).In Pakistan Steel we have observed a very effective and efficient Supply chain network from the Production houses to the Warehouses and moreover to the consumers. The Supply chain management is the key for any business's success and Pakistan Steel has managed it very well as far as we have observed.

Quality Management and Pakistan Steel Mill: Quality management can be considered to have four main components:

Quality planning 

Quality control

Quality assurance

Quality improvement

Quality management is focused not only on product/service quality, but also the means to achieve it. Quality management therefore uses quality assurance and control of processes as well as products to achieve more consistent quality. According to our survey of the Pakistan Steel, we found out that they produce less quantity of Steel but they make sure that they produce the best quality Steel in the market. The Quality management is very effective and efficient in the Organization and they have coped up pretty well with their competitors for a long time. They Claim that they produce the BEST Quality steel in the market.

Human Resource Management in Operations:

The production processes prevailing at Pakistan Steel Mills are highly automated. The chemical formula for the production of all three types of steel remains fixed. The quantity to be produced is controlled through databases and is totally computer-operated. So, a large number of labor can proved to be inefficient. The human resource requirements for such an automated plant are:

Engineers

Highly-skilled computer staff

Chemical Experts

Machinery maintenance workers

Information Technology to Support the Operations:

Since, the plant of Pakistan Steel Mills is operated at high degree of automation. Hence, the use of information technology is formidable.

They use computerized databases to manage inventory control.

Auto fault detection computer based software is used for the maintenance of plant's machinery.

The record of all the operations is managed through databases.

Quality checks are also run through computerized testing devices.

RECOMMENDATIONS

The recommendation that we as a group would like to make to PSM;

R&D: Steel Mills is using a 100 years old production process to manufacture steel. This process produces high quality billet. Countries like India and China are using direct extraction method through impure iron ore. The steel produced through this process is not of very high quality but its demand in the market is higher due to its low price. The cost of producing steel through direct extraction method is lower as compared to traditional blast furnace method. By adopting this method of producing steel, steel mills can expand their target market.

Capacity utilization: Since, Steel Mills Limited is not running its plant to full capacity. Hence, they are losing their potential for export. While interviewing from the operations head of PSM we got to know that Middle East countries are willing to purchase steel from them. But due to lack of financial resources and poor management control and planning they are unable to do so. Therefore, now they have to layout an efficient strategy to optimize their capacity. So that they can export steel and overcome their financial crises they are facing.

Cheaper fuel: They should be using cheaper fuel instead high octane (48 Carbon) diesel. Instead they can use high octane diesel (Carbon 36 or Carbon 24). This would help in decreasing the production cost.

Proper utilization of local natural resources; According to the Geological survey of Pakistan, Kalabagh (Mianwali district) holds substantial iron ore reserves at an approximate 9,300 million tons. Which will result in a substantial decrease in the cost of raw materials?

The PSM should focus on developing and supporting mini steel mills which require less capital investment and based on supply from local iron ore deposits in Punjab, Khyber-Pakhtunkhwa, and Baluchistan.

Maintenance: Pak. Steel Mills need to revise its maintenance system of its heavy duty equipment. The old equipment needs proper and timely maintenance to ensure that process of steel mill moves in an efficient manner.

Collaborate with foreign countries on the operation and management of the steel mills. PSM should also try to get technical and financial assistance from foreign countries.

PSM needs to frame a strategy for energy conservation, create linkages between industry and university circles and make sure the availability of skilled manpower and establishment of factory schools. So that they can have more skilled, knowledgeable and expert people.


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