Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant

A Summer Project Proposal for

Post-Graduate Diploma in Management

By

Srikanth Kumar Konduri

Under the guidance of

Mr. Sandeep Banka DGM, Costing & MIS Adhunik Metaliks Limited

Dr. Gunjan Malhotra Assistant Professor IMT, Ghaziabad

May, 2011

Adhunik Metaliks Limited 2 Production Cost Management and MIS Formulation

Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant

By

Srikanth Kumar Konduri

May, 2011

Adhunik Metaliks Limited 3 Production Cost Management and MIS Formulation

Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant

By

Srikanth Kumar Konduri

Under the guidance of

Mr. Sandeep Banks DGM, Costing & MIS Adhunik Metaliks Limited

Dr. Gunjan Malhotra Assistant Professor IMT, Ghaziabad

May, 2011

Adhunik Metaliks Limited 4 Production Cost Management and MIS Formulation

Certificate of Approval
The following Summer Project Report titled "Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.

Summer Project Report Examination Committee for evaluation of Summer Project Report Name Signature

1. Faculty Examiner

Dr. Gunjan Malhotra

_______________________

2. PG Summer Project Co-coordinator

Mr. Sandeep Banka

_______________________

Adhunik Metaliks Limited 5 Production Cost Management and MIS Formulation

Certificate from Summer Project Guides

This is to certify that Mr. Srikanth Kumar Konduri, a student of the Post-Graduate Diploma in Management, has worked under our guidance and supervision. This Summer Project Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer project, monograph, report or book.

Dr. Gunjan Malhotra Assistant Professor IMT, Ghaziabad Date: 31st May 2011

Mr. Sandeep Banka DGM, Costing & MIS Adhunik Metaliks Limited Chadrhariharpur, Rourkela Date: 31st May 2011

Adhunik Metaliks Limited 6 Production Cost Management and MIS Formulation

Acknowledgement
I would like to express my heartiest gratitude to Mr. Ratan K. Saha (General Manager - HR) Adhunik Metaliks Ltd. Kolkata for giving me an opportunity to work as a summer intern and work on the project titled Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant. I am sincerely thankful to Mr. Sandeep Banka (DGM, Costing & MIS) under whose guidance I have successfully completed this project. I thank him for his consent, encouragement, and warm response and for filling every gap with valuable ideas that has made this project successful. I would also like to thank Mr. Siba Kumar, Mr. Sribesh Beltharia(Manager-HR), Mr. Ratan Ray (HOD-Training & Development) and Mr. Prashant Sahoo without whose support the project would not have been completed. I thank my college, Institute of Management Technology Ghaziabad for having given me this opportunity to put to practice, the theoretical knowledge that I imparted from the program. I thank my internal project guide, Prof. Gunjan Malhotra for having guided and supported me through the course of the internship. I take this opportunity to thank my parents and friends who have been with me and offered emotional strength and moral support.

Sincerely, Srikanth Kumar Konduri

Adhunik Metaliks Limited 7 Production Cost Management and MIS Formulation

Abstract
Production Cost Management and MIS Formulation A Case Study at Integrated Steel Plant By Srikanth Kumar Konduri Steel Industry has been the traditional growth driver of Construction, Infrastructure, Capital Goods & Automobile sectors in India (based on the report: CRISIL research for FY2010). Research report Indian Steel Industry Outlook to 2012 ranks India as 5th largest manufacturer of steel in the world. As per The Ministry of Steel, Indias steel manufacturing capacity is likely to touch 124.06 million tons by FY2012 and 293 million tons by FY2020. Steel industry contributes around 2% of the Gross Domestic Product (GDP - $1.537 Trillion for FY2010 as per International Monetary Fund) and is poised to grow at a CAGR of 10% during FY2010-FY2013, surpassing Indias GDP growth (8.6% for FY2010 and 9% for FY2011). Growth is majorly fuelled by the rise in demand for construction projects which may go up to $1 Trillion. Gaining from the growth tide of this sector, Adhunik Group has established an integrated steel plant at Rourkela during FY2002, which is now earning a PAT of $40.65 Million in FY2011, recording a PAT yo-y growth of 31.65%. After having completed the integration of steel making facilities over past 8 years, now AML is looking towards optimizing its product-mix and internal operations for maximizing profitability with existing capacity. Purpose of this summer internship program is to study the product costing system at AML plant and formulate an MS-Excel based MIS, which will assist in taking decisions related to product mix and setting operational parameters. The project deliverables are: 1. Back tracing the flow of costs from raw-material to finished rolled products. 2. Study of Coke-Oven, DRI, Sinter and FAD plants and perform a cost-driver analysis from the perspective of quality consistency. 3. Customer, Grade classification matrices based on total Contribution and total Quantity. 4. Use of Linear Programming for optimizing product-mix of FAD plant to minimize input cost.

In order to formulate different objective functions for above mentioned plants and obtaining the optimization solution subject to corresponding constraints using MS-Excel Solver, the exercise required frequent interactions with the HODs of respective plants and seeking their inputs on critical aspects affecting the plants productivity. Pivot Table is used for grouping the customers sales data and SPSS is used for forming the Customer-Grade classification clusters.

Adhunik Metaliks Limited 8 Production Cost Management and MIS Formulation

Table of Contents

Acknowledgement ........................................................................................................................... 6 Abstract ............................................................................................................................................ 7 Table of Contents ............................................................................................................................. 8 List of Figures ................................................................................................................................ 10 List of Tables ................................................................................................................................. 10 Abbreviations..10 I Introduction .......................................................................................................................... 10 1.1 Steel Sector in India .................................................................................................... 11 II About AML ......................................................................................................................... 12 2.1 Companys Vision Statement ..................................................................................... 12 2.2 Companys Goals ........................................................................................................ 12 2.3 Facilities ...................................................................................................................... 12 2.4 Steel Making Overview .............................................................................................. 13 2.5 Operations ................................................................................................................... 14 2.6 Production planning framework: ................................................................................ 16 III Case Study ......................................................................................................................... 16 3.1 Problem Statement ...................................................................................................... 16 3.2 Objective ..................................................................................................................... 16 3.3 Scope........................................................................................................................... 16 IV Project Deliverables ........................................................................................................... 17 4.1 Case Modeling ............................................................................................................ 17 4.2 Solution Framework ................................................................................................... 17 V Phase-1: Product Costing System ....................................................................................... 17 5.1 Per Unit Cost calculations of Rolled product: ............................................................ 18 5.2 Per Unit Cost calculations of product from SMS plant: ............................................. 19 5.3 Per Unit Costing statement of 40CR4B grade rolled Billet ........................................ 20 VI Phase-2: Perceived Yield improvement suggestions of critical plants .............................. 21 6.1 Observations from the study of Sinter Plant: .............................................................. 22

Adhunik Metaliks Limited 9 Production Cost Management and MIS Formulation

6.2 Sinter Plant process related calculations for March 11.............................................. 24 6.3 Observations from the study of DRI Plant:................................................................. 25 6.4 DRI Plant process related calculations for March 11 ................................................ 26 6.5 Observations from the study of FAD Plant:................................................................ 27 VII Phase-3: Customer Classification ..................................................................................... 28 7.1 Top 20 Customers whose contribution to the total revenue is greater than 1% .......... 28 7.2 Billets: ......................................................................................................................... 29 7.2.1 List of Top 20 Billet Customers: ................................................................ 29 7.2.2 A Category Billet Customers: .................................................................. 30 7.3 Rolled Products: .......................................................................................................... 30 7.3.1 List of Top customers for rolled products................................................... 30 7.3.2 A Category Rolled Product Customers: ................................................... 31 7.4 Pig Iron: ...................................................................................................................... 31 7.4.1 List of the Top customers of Pig Iron ......................................................... 31 7.4.2 Semi Finished Ferro Alloys: ....................................................................... 32 7.5 List of Top customers of Ferro alloys ......................................................................... 32 7.6 A Category High Quality Alloy Steel Customers .................................................... 33 VIII IX Conclusion & Recommendations..33 References.35

Adhunik Metaliks Limited 10 Production Cost Management and MIS Formulation

List of Figures
Figure No: Description Page

Figure 1: Sector-wise steel consumption ..................................................................................... 11 Figure 2: Pie chart showing production of crude steel across the world ..................................... 11 Figure 3: Integrated flow-chart of Steel Making with rated capacities ....................................... 13 Figure 4: Material-wise sales volume distribution....................................................................... 15 Figure 5: Material-wise revenue distribution ............................................................................... 15 Figure 7: Slag Volume Vs Al2O3% in Sinter .............................................................................. 24 Figure 8: MBF Slag Volume Vs HB Temp. ................................................................................ 24 Figure 9: %FC Vs Coke Rate in Sinter ........................................................................................ 24 Figure 11: DRI Coal Consumption analysis ................................................................................. 26 Figure 12: KWH Consumption per ton of DRI production .......................................................... 26 Figure 13: Raw-Material price movement of DRI ........................................................................ 26 Figure 14: Formulation Model of FAD plant input mix ............................................................... 27 Figure 15: Constraints, objective function for optimizing FAD production cost ......................... 27

List of Tables
Table No: Table 1: Table 2: Table 3: Table 4: Description Page

Per Unit Costing statement of 40CR4B Rolled product ................................................ 20 Per Unit Cost statement of Coke Oven .......................................................................... 21 Pu Cost calculations of Sinter Plant............................................................................... 22 Pu cost calculations of DRI plant .................................................................................. 25

Abbreviations
DRI : Direct Reduction Iron FAD : Ferro Alloys Department EAF : Electric arc Furnace LF : Ladle Refining Furnace VD : Vacuum Degasser CC : Continuous Caster MBF : Mini Blast Furnace SMS : Steel Making Shop AOD : Argon Oxygen Decarburizer

Adhunik Metaliks Limited 11 Production Cost Management and MIS Formulation

I Introduction
1.1 Steel Sector in India
India has traditionally been one of the major producers of steel in the world. Till FY1990s the steel industry of India was regulated and controlled by government policies. India has set a vision to be an economically developed nation by FY2020. The steel industry is expected to play a major role in India's economic development in the coming years. The steel industry of India has a very high growth potential and is expected to register significant growth in the coming decades. India is expected to emerge as a strong force in the global steel market in coming years. Steel industry has a major role to play in the economic growth of India. With new global acquisitions by Indian steel giants, setting up of new state-of-the-art steel mills, modernization of existing plants, improving energy efficiency and backward integration into global raw material sources, India is now on the center of the global steel map. Consumption of steel in the construction sector, industrial applications, and transport sector has been on the rise and special steel usage in engineering industries such as power generation, petrochemicals and fertilizer industry is also growing.

Figure 1: Sector-wise steel consumption

India has retained its position as the 5th largest producer in FY2010 and recorded a growth of 11.3% as compared to FY2009. India has also emerged as the largest sponge iron/direct reduced iron (DRI) producing country in the world in FY2010, a rank it has held on since FY2002. Sponge iron production grew at a CAGR of 11% to reach a level of 20.74 million tonne (MT) in FY2009 as compared to 14.83 MT in FY2005. India is expected to become the second largest producer of steel in the world by FY2015, on account of growing steel demand, rich resources base of iron ore, skilled manpower and vast experience of steel making and the huge capacity expansions are planned and being executed in the steel sector.
Figure 2: Pie chart showing production of crude steel across the world

Adhunik Metaliks Limited 12 Production Cost Management and MIS Formulation

II About AML
Adhunik Metaliks Limited (AML), the flagship company of Adhunik Group, has emerged as one of the fastest growing alloy, special and construction steel manufacturing companies in the country with significant presence in mining and power sectors through its subsidiaries. It has completed almost all major capital expenditure for both backward and forward integration and emerged as an integrated

manufacturer of special steel with downstream utilization of products. It has set up an integrated steel plant of 0.45 million ton at Sundergarh, Orissa, with state-of-the-art technology. Within a very short span of time, the products of the Company have been recognized by the major automobile component manufacturing and automobile companies like Tata Motors, Mahindra and Mahindra, Guru Nanak Forging, Ramkrishna Forging and many more. The company is catering to a diversified market comprising automobiles, telecom, power, railways, engineering, oil & gas and construction sectors.

2.1 Companys Vision Statement

To attain leadership in all our businesses through relentless pursuit of excellence, while delivering superior value to our stakeholders.

2.2 Companys Goals

1. To be one of India's fastest growing conglomerates 2. To be among the top 5 in India across all our businesses 3. To continuously identify and seize global opportunities for growth 4. To be one of the best places to work for 5. To contribute to society by delivering superior value to all our stakeholders

2.3 Facilities
The company set up an integrated steel plant of 0.45 million ton per annum at Sundergarh, Orissa, with state-of-the-art technology. The company has its Corporate Office in Kolkata. The company has customers across the country, spanning the categories Automotive OEMs, Forging & Engineering, Telecom & Power/Oil & Gas and Agricultural Equipment. It has marketing offices in seven states in India namely West Bengal, Jharkhand, Orissa, Punjab, Haryana, Maharashtra and Karnataka. Tata motors, BHEL, JML AUTO LTD, RKFL, SAIL and SIEMENS are few of its esteemed customers.

Adhunik Metaliks Limited 13 Production Cost Management and MIS Formulation

2.4 Steel Making Overview

Figure.3 given below portrays the flow of materials and respective plant capacities involved in the steel making process. The scrap generated at various stages is reused in EAF and based on the requirement of customer; steel will be produced either through EAF-LF-VD-CC route or via EAF-AOD-CC route. Raw-materials blending (for Iron-ore, Coke) will be done based on the material availability procured from various mining facilities in order to ensure quality consistency for minimizing the customer rejections. Sponge-Iron is produced from DRI plant, while MBF produces hot-metal and SMS plant produces Billets/Blooms. Pig-Iron is produced as a by-product of MBF and FAD plants.

Figure 3: Integrated flow-chart of Steel Making with rated capacities

Coke-Oven Plant: Fulfills the Coke requirements of the plant by producing it from Coal. Sinter Plant: Produces Iron-ore Sinter using the iron-bearing waste material generated within the plant. It is used in Blast Furnace to enhance the process of hot-metal making. DRI Plant: Produces Sponge-Iron by directly reducing the Iron-Ore in solid state using CO gas. It forms 50%-55% of charge-mix in the EAF of SMS plant. MBF Plant: Produces the hot-metal using Iron-Ore and Sinter and is tapped by SMS plants. SMS Plant: Produces steel products in the form of Billets/Blooms using the Sponge-Iron from DRI and hot-metal from MBF.

Adhunik Metaliks Limited 14 Production Cost Management and MIS Formulation

Rolling Mill Plant: Rolls the Billets/Blooms produced from SMS plant as per the customer specifications to ensure adequate compactness. Captive Power Plant: Partly satisfies the power requirements of this steel plant. It utilizes the flue gases generated from DRI plant to fuel the turbines and generate electricity. Coal-Washery Plant: Crushes and washes the incoming Coal to make it suitable for DRI process. AOD Unit: Argon-Oxygen-Decarburize is used to remove the remaining Carbon from the processed hot-metal of SMS plant in the presence of an inert gas, used for producing high quality stainless steel grades.

2.5 Operations
The products manufactured in AML are:

(Note: Dimensions mentioned are in mm-millimeters) Billets: These are long rectangular blocks of steels which would need further processing for making auto parts from it. Billets Size 125 x 125 160 x 160 200 x 200 Bloom Size 240 x 240 300 x 320

The price of the Billets varied from Rs 44000/- to 22000/- per ton according to the grade quality. Rolled Products: Billets are further processed into Rolled products in Rolling Mill that are used in forging process for the production of auto parts. Rolled Products include Round Cornered Square (RCS), Round Bars, TMT product, Wire Rods. According to the grade quality the price of Rolled product varied from Rs 66000/- to Rs 23000/- per ton. Pig Iron: This is the crude form of Iron that is sold to other manufacturing companies. The price of Pig Iron is steady and it varies only with the fluctuations with the Iron prices in the world. The price is around Rs 23000/-.

Adhunik Metaliks Limited 15 Production Cost Management and MIS Formulation

Semi-Finished Ferro Alloy: These are special carbon steels manufactured in FAD-Ferro Alloy Division. These Steels are used in making bearings, gears and other auto parts. These are special steel alloys and the prices of these steels vary from Rs 81000/- to Rs 35000/- depending on grade quality. Others: The various other products of AML include trading material, semi-finished gases, sized coal, stores and spares etc.

The total production capacity of the plant is 0.45 million ton per year. Out of this Billets, Rolled products, Pig Iron, Semi Finished Ferro Alloys form 0.38 million ton. Figure.4 shows the percentage quantity of the products sold by AML during FY2010. It can be seen from the graph that Billets constituted largest according to the volume sold, followed by Rolled Products, Pig Iron & Semi Finished Ferro alloys. Sales of billets & higher value rolled products increased 22% & 15% y-o-y and 23% & 3% q-o-q respectively due to higher demand in the domestic Auto industry.

Figure 4: Material-wise sales volume distribution

Figure.5 shows the contribution of each type of product to the total revenue of the company during FY2010. As seen from the graph Rolled products contribute the highest followed by Billets, Pig Iron and Ferro alloys. The total revenue of AML during FY2010 is $292.5 Million.

Figure 5: Material-wise revenue distribution

Adhunik Metaliks Limited 16 Production Cost Management and MIS Formulation

2.6 Production planning framework:

Production process is mainly driven by the customers demand. SMS & Rolling Mill plants play a crucial role in satisfying customers demand. Demand for SMS Plants and Transportation are constrained by the planned capacity of Rolling Mill. Sales and Distribution is also a major concern of integrated production planning. Purchasing department is responsible for procuring raw-materials and fluxes. PPC department deals with facility allocation at different production facilities and takes make/buy decisions before accepting a production order. Quality Assurance department studies feasibility of every received order and also does periodic end product sampling of various sub-plants, for achieving customer satisfaction. With the implementation of SAP R/3, AML enjoys seamless transfer of information across various departments, so that there are no time delays in gaining access to time critical operational information. It also allows every department to align their individual production plans with that of the Central production plan provided by PPC, so that day-to-day monitoring can be done to reduce idle time, further enhancing the plant utilization capacity. However, SAP is not yet capable of providing optimal production plans as the customer demands, along with raw-material availability and prices are frequently changing, product costing is performed using MSExcel and the FICO module is yet to get fully implemented in SAP. As of now, PPC is actively coordinating with HODs of various production departments to match the customers demand.

III Case Study

3.1 Problem Statement
Motivated by the growth prospects in Iron & Steel Industry, many business giants are planning to setup their in-house integrated steel production facilities, thus making steel as a highly competitive commoditized product. Going by the strategy of AML to become a high quality, lowest cost steel producer, CEO of AML wants to look into the areas of improvement in various production plants for enhancing their respective yields and also look into the profitability of various grades being produced by Costing department, along with identification of critical customers by PPC to increase the business transactions.

3.2 Objective
To report the operational aspects of production houses from the financial perspective. To classify the steel products and customers into Quantity-Contribution matrices. To formulate a pilot Linear Programming model for optimizing product-mix of FAD plant and trace the costing of a particular steel grade from Rolling Mill to that of production houses.

3.3 Scope
Scope of the study is limited to the production cost details available for March 11. Maximum capacities and efficiencies are limited by the corresponding parameters during the month of achieving best ever production volumes achieved till date.

Adhunik Metaliks Limited 17 Production Cost Management and MIS Formulation

IV Project Deliverables
Analyzing major cost drivers of DRI Plant and formulating costing relationships. Analyzing major cost drivers of Sinter Plant and formulating costing relationships. Studying Coke-Oven plant and suggesting possible technological up gradations. Classifying customers and grades into Quantity-Contribution matrices and identifying value adding customers, grades. Back tracing Product Costing from the Rolling Mill plant to the basic production houses. Optimizing the Product-mix of FAD plant for minimizing production cost.

4.1 Case Modeling 4.2 Solution Framework

Project is executed in four phases. During phase-1, the costing system is understood and analyzed based on the data available in the costing sheets of individual plants for March 11 and a back tracing equation is designed to connect align end product costing with the direction of material flow. In phase-2, a live field study is performed to have a hands-on experience of production plants working and also interacted with corresponding HODs to know their perception about plants performance along with projected expectations in case of implementing process changes, and the limiting capacity constraints. In phase-3, production planning and marketing framework is understood from the PPC department and sales data related to the grades and customers during FY2010 is collected for further classification analysis. Finally, in phase-4 linear programming method is formulated for product-mix optimization in FAD plant.

V Phase-1: Product Costing System

Steel is one of the traditional types of manufacturing industry, which usually produces uniform set of products on a continuous basis. So, composition of products produced in a particular campaign remains the same. Process Costing is adopted to account for the amount of resources consumed in a particular process along with overhead incurred in the form of electricity & fuel consumption, depreciation of fixed assets, and the conversion costs include the cost of labor, fluxes, stores & other consumables. As the blend of Raw-material and fluxes used contain components procured from various supply sources and various steel grades are being produced by the addition of alloys to the basic hot-metal charge in DRI, all the costs incurred will be accounted on an average basis for any particular month based on the production data obtained from individual plants on a daily basis. Allocation of overheads is done according to the proportion of quantity produced from different plants if the output of a plant is being distributed to other two or more plants. The fixed costs of individual plants will be cumulated as the materials move across the value chain from raw-material stage to Sponge-Iron/Pig-Iron/Semi-finished Ferro Alloy/Billet or Bloom/Rolled Product stage; these costs will be treated as captive consumption costs as they are consumed within the plant operations.

Adhunik Metaliks Limited 18 Production Cost Management and MIS Formulation

Depreciation of fixed assets is accounted using Written-Down-Value method and added with Interest paid on Working Capital, Long-Term Loans, and budgeted allocation of Salaries to calculate the financial cost. (Part of Overhead Cost) The following example is used to describe Product Costing at AML: Suppose the product produced is: 1ton of a Rolled Product-AML of grade 40CR4B It will be a product coming out of SMS to the Rolling Mill and then will be rolled. 40CR4B Billet SMS Plant Unrolled Rolling Mill 40CR4B Rolled Unrolled 40CR4B finished product

5.1 Per Unit Cost calculations of Rolled product:

[Cost of 1ton of Rolled 40CR4B] = [Cost of 1ton of 40CR4B Billet] + [Total Rolling Cost PMT] [Total Rolling Cost PMT] = [Financial Cost of Rolling Plant PMT] + [Net Rolled Cost PMT] [Net Rolled Cost PMT] = [Gross Rolled Cost PMT] [Recoverable end-cuts & miss rolls PMT] [Gross Rolled Cost PMT] = [Loss on Yield PMT] + [Rolling Conversion Cost PMT] [Rolling Conversion Cost PMT] = Cost of ([Furnace Oil PMT] + [Power Consumption PMT] + [Blast Furnace Gas PMT] + [Coke Oven Gas PMT] + [Contractor Fixed PMT] + [Stores & Spares PMT]) [Financial Cost of Rolling Plant PMT] = Cost PMT of ([Salary] + [Administration] + [Depreciation] + [Long-Term loan interest] + [Working Capital loan interest)] [Loss on Yield PMT] = [Average cost of a Billet PMT] [Average cost of a Billet PMT] [Rolling Mill Yield] [Rolling Mill Yield] = 100% - [Scaling & Burning Loss%] [End Cuts Loss%] [Handling Loss%] However, for the purpose of overall plants costing, all the production grades will be measured on a cumulative basis and overall average per unit cost will be used for management accounting purpose. Next page describes the procedure to calculate average per unit cost of Billet produced from SMS plant, which on a similar basis as that of Rolling Mill will accumulate the cost of production of different grades on an individual basis and overall average cost is calculated for accounting purpose.

Adhunik Metaliks Limited 19 Production Cost Management and MIS Formulation

5.2 Per Unit Cost calculations of product from SMS plant:

[Cost of 1ton of Billet from SMS] = [Raw-Material Cost Pu] + [Conversion Cost Pu] + [Overhead Cost Pu] [Raw-Material Cost Pu] = [Charge-Mix Total Cost Pu] = Pu Cost of ([Hot-Metal] + [Pig-Iron] + [Sponge-Iron] + [Scrap] + [Pooled Iron] + [Runner Skull] + [Sulphur Iron] + [SRP]) [Conversion Cost Pu] = Cost Pu for consumption of ([Power] + [Gases] + [Electrodes] + [Fluxes] + [Carbon] + [Alloys]) [Overhead Cost Pu] = Cost Pu for consumption of ([Stores & Spares] + [Contractors] + [Refractory] + [Other maintenance]) + [Financial Expenses Pu] [Other maintenance Cost Pu] = Cost Pu for consumption of ([Pentasol] + [Water] + [Steam for VD] + [HSD] + [Furnace oil] + [Blast Furnace Gas]) [Financial Expenses Pu] = Pu expense of ([Salary] + [Administration] + [Depreciation] + [Long-Term loan interest] + [Working Capital loan interest]) [Pu cost of Carbon] = Pu consumption cost of ([Calcinated Petroleum Coke] + [Gun Powder] + [Breeze Coke] + [Coke Fines]) [Pu cost of Fluxes] = Pu consumption cost of ([Lime] + [DoloLime] + [Dolo Chips] + [CaC2] + [Flour Spar] + [Synthetic oxidizing Flux] + [Al Mix] + [Casting Powder]) [Pu cost of Gases] = Pu consumption cost of ([Liquid Argon] + [Nitrogen] + [Oxygen]) [Charge to Billet Yield] = [Produced Billet tons] [Charge-mix in tons] (Max. = 81%)

[Charge to LM Yield] = [Produced Billet tons] + [Skull standard] + [End-Cutting] + [Skull (extra)] (Max. = 83.2%) [Charge-mix in tons]

Adhunik Metaliks Limited 20 Production Cost Management and MIS Formulation

5.3 Per Unit Costing statement of 40CR4B grade rolled Billet

All the costs are mentioned in INR for a ton of production

For SMS Plant Cost Component On March 31st For March '11 ALLOYS TOTAL >>>>> 2465.559552 2808.536562 CARBON TOTAL >>>>> 118.2097013 131.9085079 FLUXES TOTAL >>>>> 945.7537062 957.7357835 ELECTRODES TOTAL >>>>> 660.9631446 651.0974319 GASES TOTAL >>>>> 651.1685669 668.3103109 POWER TOTAL >>>>> 2183.143388 2188.855228 CHARGE MIX TOTAL >>>>> 27966.49332 27625.05536 OTHERS TOTAL >>>>> 1305.689652 1378.060258 Recoverables 305.8348068 495.9237969 Cost per MT 35991.14622 35913.63565 Financial Expenses 1534.751855 1735.922972 TOTAL COST===========> 37525.89808 37649.55862 Conversion Cost PMT. 8330.48771 8784.504082 Conversion Cost PMT. (WithouT Alloys) 5864.928158 5975.96752 Cost Per MT ( Without Alloys) 35060.33853 34841.02206 Variable Cost Fixed Cost 32421.96837 5103.929707 32345.93497 5303.623649

For Rolling Mill Plant Cost Component On March 31st For March '11 Gross Cost PMT 5736.11635 6960.835726 Recoverable-End Cuts & Miss 1399.338462 1630.109007 Mill Scale 18.14767297 18.46062814 Net Cost PMT 4318.630215 5312.266091 Financial cost 2021.491908 2893.933751 Total Rolling cost 6340.122123 8206.199842 Avg. Cost of Billet 37649.55862 37649.55862 Cost Of Rolled Product 43989.68074 45855.75846 Rolling Variable Cost 3574.977105 4438.26519 Rolling Fixed Cost 2765.145018 3767.934652
Table 1: Per Unit Costing statement of 40CR4B Rolled product

Every cost component is calculated in two phases: In phase-1, the quantity of component consumed per ton of production will be found and in the phase-2, that quantity will be multiplied by components unit cost to account for the actual consumption cost of that component for producing 1 ton of 40CR4B. Tracing back in the similar way, entire costing chain till the Raw-Material could be established.

Adhunik Metaliks Limited 21 Production Cost Management and MIS Formulation

VI Phase-2: Perceived Yield improvement suggestions of critical plants

Observations from the study of Coke-Oven Plant:
Coke Oven

Coke

MBF

Coke Fines

Sinter

Coke Solid residue obtained from destructive distillation of Coal. It accounts for 60% of hot metal cost in blast furnace. Performance of blast furnace is significantly influenced by the Coke quality. Coke quality is a function of its Ash Content, Carbon Content, Size, Moisture, Coke strength after reaction. Usage of Coke with high ash content and poor strength leads to high Coke rates in BFs. Selective Crushing can be done to have a better control of Coal size, homogeneity, M10 index improves from 1.5 to 2 over a base of 12. (based on pneumatic classifier) Carbonization technique will achieve maximum technological and economic benefits. Leads to High Capacity (Increase height/width of ovens), High Throughput (Increasing the flue temperature narrowing oven width, Cost Component Cost PMT adoption of thinner walls) ovens. But Raw-Material 21807.43604 the trend is reversing now, oven Conversion Cost: widths are becoming more (610mm), Power 153.3974015 height-7.85m, Volume-70 Cu.m Water 13.42948718 Stores & consumables 260 Water quenching reduces Coke quality (0.36-0.42 GCal. Of Contractor Cost-Variable 300 heat is lost per ton of Coke, Salary 99.00370927 pollution), Opposite to above and Total Cost 22633.26664 effective one is dry cooling in an Recoverable : inert atmosphere. Coke(0-20) 2248.794872 Average lifecycle of coke Coal Tar 509.4154736 ovens in India is 10-15 years, Coke Oven Gas 322.4693257 compared to normal cycle of 25-30 Cost PMT of MBF COKE 19552.58696 years. Damage to refractories starts in Financial Cost Tentative(DEP+LT) 826.9190424 5th, 6th years. Online analysis and controlling Coal blend quality is Total Cost PMT of MBF COKE 20379.50601 considered important to improve VC 19453.58326 quality of Coke and performance of FC (Dep.+Salary) 925.9227516 coke ovens.
Table 2: Per Unit Cost statement of Coke Oven

Adhunik Metaliks Limited 22 Production Cost Management and MIS Formulation

6.1 Observations from the study of Sinter Plant:

Iron-Ore fines (-10mm) Coke Breeze Limestone & Fluxes Silicon and Aluminum are refractive elements with a higher melting range than that of Iron. Considered as gangue, the presence of above metals in Sinter increases slag volume in BF and reduces the productivity of Blast Furnace. Lower is the gangue content, better will be the BF productivity. Lack of quality consistency arising from the lack of proper raw material blending(Sinter fines from BF returns, Iron-Ore, Slag from Rolling Mill, SMS and FeS from back filter of SMS), requiring more usage of Coke for reduction process. Sinter Plant Sintered Iron-Ore Mini Blast Furnace

Cost Component IRON ORE FINE TOTAL TOTAL COKE FINES Return Sinter, Mill Scales Limestone+Quicklime+Dolomite POWER BF GAS Water STORE Contractor Cost-Variable Contractor Cost-Fixed Salary Depreciation LT loan int Variable Cost Fixed Cost
Total COST
Table 3: Pu Cost calculations of Sinter Plant

Cost PMT 1378.402902 328.0314632 495.25 341.39 158.9366588 58.78283795 1.672675066 50 98 8.654133602 29.99281289 98.63657565 201.2186143 2910.463174 338.5021365 3249

While the required content of Fe+ in the Iron-Ore is 63%64%, presently it is just 59%. Moisture control is the most important aspect of production, it depends on operator and there is no control valve. Closed circuit moisture control device for raw-mix will reduce water wastage. Lack of moisture control and bad mixing of lime dust leads to improper blending. The inter-locking system will stop the production process when the temperature falls below 150 degree Celsius.

Better is the raw material blending, more will be the cost savings from reduced use of Coke. Instead of feeding lime dust through buckets, it is more beneficial to feed it in definite ratio in incremental levels from a pressurized tanker through a separate feeder. An addition of XRF machine will greatly help in obtaining quality consistency, as more sampling can be done in a shorter time in a day.

Adhunik Metaliks Limited 23 Production Cost Management and MIS Formulation

Presently, Sinter constitutes 65%-70% of Iron in the hot-metal produced from MBF. The content of FeO in Sinter has to be maintained at an optimum range of 8.5% - 9%, this content is in inverse relationship with the amount of Coke used. However, Coke usage should not be increased to the level that melting happens in Sinter plant. (Temperature: 1250 - 1300 degree Celsius) For the plant to be more productive, breakdowns have to be reduced (due to dust emissions), along with minimum stoppage to ensure continuity of operations. Between Productivity & Raw-Material quality, improvement of latter factor leads to more production of Sinter.

However, reduction in the delay time is also an important factor to support above improvement, as it increases plant utilization. Sinters of size 10-50mm are sent to BF. 1. When Alumina content increases the Specific Consumption of Coke increases. 2. When Fixed C content increases the Specific Consumption of Coke decreases. Suggestions: Raw material with low Alumina and high FeO content. High FeO improves Sinters strength, transportation and handling properties. [strength~ Tumblers Index] Low Al2O3 reduces specific consumption of Coke. [Coke Vs Alumina graph] Alumina being a refractory material, requires more heat to reach softening temperature and hence more Coke consumption. Use of Coke with a high Fixed Carbon Content. Decreases the usage of Coke, hence reducing the cost of production. Sinter advantages: Improves productivity of Blast Furnace. Reduces Coke rate. Since fluxes enter the burden as Sinter in a calcinated form and reduces thermal load, thus reduces the coke rate. Slag in BF forms easily and at correct level. [Limestone-CaCo3, DolomiteMgCo3, CaCo3

Lastly, Sinter utilizes wastes generated in the plant, helps environment.

Adhunik Metaliks Limited 24 Production Cost Management and MIS Formulation

6.2 Sinter Plant process related calculations for March 11

It can be inferred that the increase of Al2O3% in the composition of Sinter will lead to an increase in the Slag Volume coming out of MBF.

Figure 6: Slag Volume Vs Al2O3% in Sinter

As the Slag Volume increases, the HB temperature in MBF reduces, which in turn reduces the productivity of blast furnace.

Figure 7: MBF Slag Volume Vs HB Temp.

As the %FC in Coke Fines used for Sintering process increases, the specific Coke consumption reduces, thereby results in cost savings and pollution reduction.

Figure 8: %FC Vs Coke Rate in Sinter

The below equation shows the relationship between amount of Coke Input used and the Al2O3%, Fixed Carbon%, obtained after performing a regression analysis.

Adhunik Metaliks Limited 25 Production Cost Management and MIS Formulation

CI=110.8507+(0.387*Al2O3)-(0.078*FC%)
It can be inferred from the above equation that for a particular range of FC% in the coke fines used in Sinter production, the amount of Coke Input will vary in proportion with the Al2O3%.

6.3 Observations from the study of DRI Plant:

Cost Component Iron Ore Total Coal Total Dolomite Total Power - Total Water Stores & consumables Contractor Cost-Variable Contractor Cost- Fixed COST OF SPONGE Steam Tr to CPP Net Cost of Sponge Total Financial Cost Total Cost Total Captive FC (Coal Washery) Fixed Cost (Contractor-Fixed, Financial Cost, Captive FC) Variable Cost
Table 4: Pu cost calculations of DRI plant

Rs.PMT 10799.07 7077.989 44.16965 415.4435 1.455612 500 373 163.379 19374.51 -1068.86 18305.65 1990.427 20296.08 5 2158.916 18137.16

Iron-Ore & Flux DRI Plant Coal Washery Coal Sponge Iron

Coal used in DRI kilns should have high % of Carbon, for producing higher reducing gas temperature. (Greater than 2.5%) Hot (7000C) high % Carbon in DRI also reduces Carbon Dioxide generation. Ancillary Oxygen support system will help to improve % Metallization, which in turn improves yield-charge to liquid steel. DRI should be charged continuously (better coordination for better feed-rate) if it forms more than 35% proportion of charge-material in EAF, remaining being hot metal (around 45%) and rest the scrap. (3%) The FC% in Coal has to be maintained at a standard of 45%.

Adhunik Metaliks Limited 26 Production Cost Management and MIS Formulation

6.4 DRI Plant process related calculations for March 11

Rather than being stabilized, per ton Coal consumption is following a linear increasing trend, which is one major factor for accelerating the Total Cost of Sponge Iron production as the month end approaches.

Figure 9: DRI Coal Consumption analysis

Figure 10: KWH Consumption per ton of DRI production

Strong negative correlation between Production of Lumps & KWH Consumption per ton . More is the production of Lumps; less will be the consumption of KWH. For every 1% increase in the production of lumps, there will be 41% reduction in the consumption of KWH Fluctuations as depicted by below picture needs to be reduced so that the process variations can be studied in a batter way for finding ways to reduce the cost.
Iron-Ore raw price movement Mean Median Standard Deviation Range Minimum Maximum 448.613 461.000 92.094 414.000 219.000 633.000 Coal raw price movement Mean Median Standard Deviation Range Minimum Maximum 565.103 568.000 76.967 354.000 409.000 763.000 Coal consumption movement Mean Median Standard Deviation Range Minimum Maximum 1.907067 1.816393 0.215402 0.756874 1.544944 2.301818

Figure 11: Raw-Material price movement of DRI

Adhunik Metaliks Limited 27 Production Cost Management and MIS Formulation

6.5 Observations from the study of FAD Plant:

Ferro Alloys Division Plant Ferro Alloys

Ladle Refining Furnace

The objective is to determine which kind of inputs to be produced for producing the alloys so that the overall cost of production is minimized. The problem has been formulated in MS-Excel spreadsheet and is solved using the Solver Add-in of MS-Excel, the steps of execution are mentioned below:

Figure 12: Formulation Model of FAD plant input mix

The constraints were related to that of Mn/Fe ratio and Total Mn quantity produced. 3.5 <= Mn% / Fe% <= 3.55 and 750 <= Mn Quantity (in Kg.) <= 755

Figure 13: Constraints, objective function for optimizing FAD production cost

Adhunik Metaliks Limited 28 Production Cost Management and MIS Formulation

The final results obtained for the combination of input quantities for minimizing the production cost is as follows:

M1 M2 M3 M4(Slag) Quantity Produced (in Kg.) 444.1176471 0 2093.697479 0 Total Cost Mn/Fe Ratio Total Mn Quantity 40047.9916 3.5 755

As it can be clearly inferred from the above results that the solver is suggesting not to use the materials M2 & M4 as inputs while use the mentioned quantities of M1 & M4 to reach goal.

VII Phase-3: Customer Classification

61 companies earn nearly 70% to the total revenue of AML. These 61 companies contribute more than 0.4% individually to the AMLs revenue. These 61 companies are categorized as A priority customers. Similarly 208 companies contributed to 25% of companys income who contributed between 0.05%0.40percent individually. These are categorized as B priority customers. The rest 408 companies are categorized as C priority customers.

7.1 List of Top 20 Customers with contribution to total revenue is greater than 1%
Name of the Company NEEPAZ V-FORGE(I)LTD JAGDAMBA STEELS (P) LTD. RAMKRISHNA FORGINGS LTD. KEC INTERNATIONAL AHMEDNAGAR FORGING LTD. JAY AMBEY ENTERPRISES AARYAN TRADERS TATA MOTORS LTD ICOMM TELE LTD ASHA TRADERS ADHUNIK POWER & NATURAL RESOURCES AAKASH ENTERPRISES. HAPPY FORGINGS LTD PANCHAKANYA STEEL (P) LTD ORISON TRADERS MILESTONE GEARS PVT LTD M M FORGINGS LIMITED ADHUNIK ALLOYS & POWER LIMITED AMTEK AUTO LTD RIJ ENGINEERING PVT LTD % contribution 5.28 4.55 3.78 3.58 3.44 2.68 2.37 2.19 1.88 1.63 1.58 1.55 1.45 1.42 1.35 1.30 1.28 1.13 1.10 1.06

Adhunik Metaliks Limited 29 Production Cost Management and MIS Formulation

These 20 companies have to be retained at any costs and constant feedback has to be taken from them to keep a check on their satisfaction levels. If these companies increase their buying activity from AML by 1% it would result in 0.45% increase in total revenue. We further analyzed the sales data from April 2010 to March 2011 product wise to identify the key customers for various steels. Billets, Rolled Products, Pig Iron and Semi Finished Ferro Alloys make large portion of the steels produced in AML (nearly 90% of the total output of the plant).

7.2 Billets:
The total number of companies that brought billets from AML from April 2010 to March 2011 is 174. Out of these 174 companies Top 20 companies contributed nearly 70% of total revenue from billets. These are categorized into A priority customers. Also these 20 customers contributed more than 1% individually to the total revenue from billets. Of the rest 41 companies contributed 0.25% to 1.00% individually to the total revenue from billets and these are categorized as B priority customers. The remaining 112 are categorized as C priority customers.

7.2.1 List of Top 20 Billet Customers:

Name of the Company JAGDAMBA STEELS (P) LTD. KEC INTERNATIONAL JAY AMBEY ENTERPRISES ICOMM TELE LTD PANCHAKANYA STEEL (P) LTD AARYAN TRADERS BELLOTA AGRISOLUTIONS AND TOOLS PVT ORANGE CITY STEEL INDUSTRIES PVT.LT AMISHA STEEL PVT. LTD SAWARIA PIPES PRIVATE LIMITED SHILPA RE-ROLLERS PVT. LTD. SUNDER ROLLING MILLS PVT LTD DIVYANSH STEEL PVT LTD VENUS ROLLING MILLS PVT. LTD HIMAL IRON AND STEEL PVT. LTD. RAJDHANI FERRO (P) LTD AMITASHA ENTERPRISES PVT LTD H.L.CHOPRA STEEL ROLLING MILLS NARAYANI ROLLING MILLS PVT.LTD. CHOPRA STEEL STRIPS SATPAL STRIPS PVT. LTD. % contribution 13.8 10.86 6.66 5.71 4.30 3.06 2.42 2.21 2.20 2.09 1.95 1.90 1.59 1.59 1.57 1.40 1.29 1.28 1.24 1.21 1.06

If the sales of any one of the company is increased by 1% then it will result in 0.7% increase in the revenue of the company. These companies are of vital importance and their retention is must. Constant feedback should be taken from these companies to understand their needs and expectations.

Adhunik Metaliks Limited 30 Production Cost Management and MIS Formulation

7.2.2 A Category Billet Customers:

These are the category A customers who pay more than Rs 30000/- per ton for billets. These customers should be targeted for increasing the revenue of the company. Name of the Company
BELLOTA AGRISOLUTIONS AND TOOLS PVT DIVYANSH STEEL PVT LTD KEC INTERNATIONAL VENUS ROLLING MILLS PVT. LTD SAWARIA PIPES PRIVATE LIMITED ICOMM TELE LTD

% Contribution
2.42 1.59 10.86 1.59 2.09 5.71

7.3 Rolled Products:

These are the most important product category of AML as this category contributes highest to the total revenue. There a total of 310 customers and conversion agents for the rolled products of AML. There are a total of 30 customers who contribute nearly 70% to the total income from rolled products and these 30 customers contribute more than 0.75% to the revenue from rolled products individually. These 30 customers are classified as A priority customers. The next 56 customers contribute to 20% of income from rolled products and these are categorized as B priority customers. There are about 230 customers that are categorized into C category who contribute 10% to the income from rolled products.

7.3.1 List of Top customers for rolled products from April 2010 to March 2011.
Name of the company
NEEPAZ V-FORGE(I)LTD AHMEDNAGAR FORGING LTD. RAMKRISHNA FORGINGS LTD. TATA MOTORS LTD ADHUNIK POWER & NATURAL RESOURCES HAPPY FORGINGS LTD AMTEK AUTO LTD RIJ ENGINEERING PVT LTD SMI-AMTEK CRANKSHAFT PVT. LTD. HIM TEKNO FORGE LTD. MILESTONE GEARS PVT LTD NEW ALLENBEERY WORKS TALBROS ENGINEERING LIMITED ANANT STEEL CORPORATION BHARAT FORGE LTD. JMT AUTO LTD TRINITY INDIA LTD

% contribution
11.36 7.40 5.01 4.71 3.37 3.11 2.37 2.27 2.03 1.87 1.80 1.69 1.64 1.38 1.36 1.29 1.28

Adhunik Metaliks Limited 31 Production Cost Management and MIS Formulation

SADHU FORGING LTD M M FORGINGS LIMITED 1.26 1.18

7.3.2 A Category Rolled Product Customers:

The price of the rolled products varies from Rs 66000/- to Rs 23000/- depending on the grade quality. Given below is the list of the customers of category A and who buy high quality rolled products.

Name of the company JMT AUTO LTD VISHAL ENGINEERS HINDUSTAN MOTORS LTD. SOUTHERN STEELS & FORGINGS AADINATH ASSOCIATES HIM TEKNO FORGE LTD.

% contribution 1.29 0.82 0.93 0.89 1.00 1.87

If the contribution of the category A customers increases by 1% then the total revenue from that product type increases by 0.7%.

7.4 Pig Iron:

This is the crude form of Iron and the prices are decided according to market trend i.e. the cost of Iron across the country. The Pig Iron quantity sold is 9% of the total quantity of steels sold by AML and it generates 5.5% of the revenue to the company. Total of 67 companies buy Pig Iron from AML and there are 10 major customers who contribute to 60% of the revenue from Pig Iron collectively. These 10 customers contribute to more than 2% to the revenue from Pig Iron individually.

7.4.1 List of the Top customers of Pig Iron from April 2010 to March 2011.
Name of the company SHREE METALIKS LIMITED. SCAN STEELS LTD. PAWANJAY SPONGEIRON LTD EPIC ALLOY STEEL PVT. LTD. NEETESH UDYOG. ROURKELA STEEL CORPORATION MAA ALLOYS PRIVATE LTD SHREE SHIV SAI STEEL INDUSTRIES % contribution 10.02 9.33 8.42 7.83 4.79 3.95 3.44 3.13

Adhunik Metaliks Limited 32 Production Cost Management and MIS Formulation

OCL IRON AND STEEL LIMITED MAHESWARI ISPAT LIMITED SHREE GANPATI CASTINGS 2.75 2.52 2.30

7.4.2 Semi Finished Ferro Alloys:

These are special steel alloys and the prices of these steels vary from Rs 81500/- to Rs 35000/- per ton. The price depends on the quality of the alloy steel ordered. The semi finished Ferro alloys contributes 7% to the total revenue of the company. Where as its production is less than 4% of the capacity of the plant. So this alloy steels give high return to the company. There are a total of 95 companies that buy Ferro alloys from AML. Out of these 95 companies, 20 companies contribute to about 70% collectively to the total revenue from Ferro alloys and these companies also contribute more than 1.5% to the total revenue from Ferro alloys individually and these are categorized as A category customers.

7.5 List of Top customers of Ferro alloys from April 2010 to March 2011.
Name of the Company ADHUNIK ALLOYS & POWER LIMITED JAGDAMBA IRON & STEEL PVT. LTD PRIME ALLOYS JINDAL STEEL & POWER LTD KAY BEE INDUSTRIAL ALLOYS P LTD JAY AMBEY ENTERPRISES MITTAL CORP LTD ESSAR STEEL LTD SMC POWER GENERATION LTD SIDDHARTH MERCANTILE PVT. LTD. BHUSHAN POWER & STEEL LIMITED MUKUND LTD. A/C KALAYANI STEELS LTD RAGHAV STEEL SCAN STEELS LTD. REMI METALS GUJARAT LIMITED FLUXMIN METAL P. LTD. FERMET ROHSTOFFHANDEL GMBH SATVIK ENTERPRISE LTD % contribution 8.34 8.32 7.24 7.23 5.70 4.91 2.94 2.77 2.51 2.12 2.09 1.95 1.94 1.91 1.83 1.72 1.69 1.61

Adhunik Metaliks Limited 33 Production Cost Management and MIS Formulation

7.6 A Category High Quality Alloy Steel Customers

Given below is the list of companies which but high quality alloy steels (they pay more than Rs 60000/- per ton and are A category customers). An increase of sales of 1% to these companies will result in an increase of 0.7% in total revenue from Ferro alloys. Name of the Company KAY BEE INDUSTRIAL ALLOYS (P) LTD MITTAL CORP LTD MUKUND LTD. A/C KALAYANI STEELS LTD RAGHAV STEEL REMI METALS GUJARAT LIMITED % contribution 5.70 2.94 1.95 1.94 1.83

The companies from the above list should be targeted so as to increase the revenue of the company. As these are customers of high value, constant feedback should be taken to know their expectations and perceptions of the company.

VIII Conclusion & Recommendations:

With the competition ever increasing in the Medium-scale steel production segment thus leading to scarce availability of high grade coal, coke which is necessary for better plant productivity, Adhunik wants to stay ahead in the race by positioning itself as the lowest cost steel manufacturer for maintaining sustainable margins over a period of time. Most important factor to be controlled for achieving its strategic goal is to minimize the operational cost vis--vis improving operational efficiency, which is considered to be an internal process enhancement. Another vital factor considered during the project study was to retain those customers who are adding a premium value by either ordering superior grades of steel in considerable quantity, or by paying a higher price than others to secondary grade steel products. Next task will be to spot and target such similar kind of customers as management views across the value chain of its production process. While the recommendations related to individual plant and various quantity-contribution segments are already mentioned in the preceding pages of the document at the respective locations, a consolidated list follows next for having a quick glance at all of them.

Adhunik Metaliks Limited 34 Production Cost Management and MIS Formulation

Coke Oven: Selective Crushing can be done to have a better control of Coal size, homogeneity,
M10 index improves from 1.5 to 2 over a base of 12. (based on pneumatic classifier) Water quenching reduces Coke quality (0.36-0.42 GCal. Of heat is lost per ton of Coke, pollution), Opposite to above and effective one is dry cooling in an inert atmosphere.

DRI Plant: Strong negative correlation between Production of Lumps & KWH Consumption per ton. More is the production of Lumps; less will be the consumption of KWH. For every 1% increase in the production of lumps, there will be 41% reduction in the consumption of KWH

MBF Plant: As the Slag Volume increases, the HB temperature in MBF reduces, which in turn reduces the productivity of blast furnace. Sinter Plant: It can be inferred from the above equation that for a particular range of FC% in the coke fines used in Sinter production, the amount of Coke Input will vary in proportion with the Al2O3%. It can be inferred that the increase of Al2O3% in the composition of Sinter will lead to an increase in the Slag Volume coming out of MBF. FAD Plant: Do not use the materials M2 & M4 as inputs while use the mentioned quantities of M1 & M4 to reach the goal of minimizing input-mix cost of FAD plant, subject to the constraints of 3.5 <= Mn% / Fe% <= 3.55 and 750 <= Mn Quantity (in Kg.) <= 755 Top 20 companies whose individual contribution towards companys revenue is more than 1% have to be retained at any costs and constant feedback has to be taken from them to keep a check on their satisfaction levels. If these companies increase their buying activity from AML by 1% it would result in 0.45% increase in total revenue. Category A Billet customers pay more than Rs 30000/- per ton for billets. These customers should be targeted for increasing the revenue of the company. If the contribution of the category A Rolled product customers increases by 1% then the total revenue from that product type increases by 0.7%. An increase in sales by 1% to A Category alloy steel companies will result in an increase of 0.7% in total revenue from Ferro alloys.

Adhunik Metaliks Limited 35 Production Cost Management and MIS Formulation

IX References:
Research Paper Indian Steel Industry sees faster recovery from Global slowdown, Union Budget Analysis & Outlook 2010-11, CRISIL Research, pp. 83-85. Indian Steel Industry Outlook to 2012, Market Research report, RNCOS Industry Research Solutions.

Government Publication Ministry of Steel, Government of India, Annual report 2010-11, pp. 165-168.

Article in Business Portal Sector Wise GDP of India, business.mapsofindia.com, Share of sector wise contribution to GDP in India 2010.

Books

Thomas P. Edmonds, Bor-Yi Tsay and Philip R. Olds (2008), Fundamental Managerial Accounting Concepts, 4th Edition, Tata McGraw-Hill Publications

Journal Paper World Steel Review-June 2011, World Steel Production Report, ISSB Monthly World Steel Production Review. International Journal of Operations & Production Management, Vol. 17 No. 6, 1997, pp. 592-610. MCB University Press, 0144-3577