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Challenges: Steel Consuming Industries

Introduction
The steel industry has recorded fast growth rates in both production and consumption over the past few years, benefiting from soaring steel demand in the automobile and construction sectors The largest drivers of steel consumption have historically been the automotive and construction markets, which absorb more than 50% of total steel production. Other steel consuming industries include appliances, converters, containers, tin, energy, electrical equipment, agricultural, domestic and commercial equipment and industrial machinery.

Business Case
For instance, Stamping companies consume steel in EA (Each) for making the metal plates, Construction and EPC (Engineering, Procurement and construction) Industry consumes Steel rods and I-Beams in M (Meter) or Ft (Feet). It is a known fact that all Steel consuming companies procure their steel requirements in Mass Unit of Measure i.e. Tons, Kg etc. It is common finding that SAP supports multiple Units of Measure. However, it is expected that users maintain Conversion Factor for these units. However, it is common finding in industry that in case of steel the conversion is not constant. For instance, 1 Ton of steel plates may contain 95 sheets or 105 sheets depending on thickness of the plate. Manufacturing standards of steel industry allow tolerance limits that create this variation. This leads to following issues Discrepancy in Raw Material stock Discrepancy in scrap

Central Facility Building,1st Floor, A-Block, MIHAN SEZ, Nagpur (INDIA) T +91 7104 666251 F +91 7104 666257 H.Q.- 4580 Automall Parkway, #121 Fremont, CA 94538 T: (510) 578 3200 F: (510) 578 3222 www.klouddata.com

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Discrepancy in Raw Material Stock

Let us take an example of steel plates where a plate has following characteristics Thickness Weight Hence, Conversion Factor in system is maintained at 1 T = 10 EA However, consider a case where Purchase Order of 10 T was received with each plate weighing 98 Kg (within acceptable manufacturing standards). Now, Material Received Stock Update Discrepancy 10 T i.e.102 Sheets 100 EA 2 EA 10 mm (9.5~10.5 mm) 100 Kg (95~105 kg)

Such differences over period will lead to wrong results of MRP, Stock Pile-up, Unexpected shortages etc.

Discrepancy in scrap
Again let us consider a case of stamping industry. Bills of Material states that 1 EA of steel sheet generates 1 Car Door plus 10 kg of scrap. However actually, a steel plate weighing 98 kg will produce scrap of 9.8 Kg. Such difference, over a period, can lead to huge difference in scrap inventory.

Central Facility Building,1st Floor, A-Block, MIHAN SEZ, Nagpur (INDIA) T +91 7104 666251 F +91 7104 666257 H.Q.- 4580 Automall Parkway, #121 Fremont, CA 94538 T: (510) 578 3200 F: (510) 578 3222 www.klouddata.com

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Solution
SAP has a solution originally created for Pharmaceutical Industry that allows specifying batch specific conversion factor.

User may choose one of the options System allowing user enters batch specific conversion factor and system calculating the other quantity (System carries out conversion from Procurement unit to Base Unit) System allowing user to enter both quantities and calculating batch specific conversion factor. Once the settings are done and master data is maintained, at the time of Goods Receipt, User will enter quantities and/or conversion factor. System will create a batch number / ask user to enter batch number depending on setting of batch management System will store conversion factor and batch number in a table containing batch data.

Impact on problem

During Goods Issue, system looks for requisite batch data and deducts appropriate quantities in both units of measure. For instance, in the case stated above, system would deduct 98 Kg for each plate issued though standard unit of conversion is 100 Kg for each plate. Since system is now maintaining data for each batch in terms of EA received and T (or Kg) received, a report can be drawn to justify the scrap discrepancy. Alternatively, a custom development can be created to calculate exact quantity of scrap and post it at the time of back flush.

Central Facility Building,1st Floor, A-Block, MIHAN SEZ, Nagpur (INDIA) T +91 7104 666251 F +91 7104 666257 H.Q.- 4580 Automall Parkway, #121 Fremont, CA 94538 T: (510) 578 3200 F: (510) 578 3222 www.klouddata.com