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Market Dynamics
The metals industry plays a significant role in the worldwide economy. It provides the base materials for a variety of other major industries such as construction and automotive.
In the last 20 years the Integrated rolling mills industry has invested heavily in manufacturing technology that has focused on increasing quality and capacity. At the same time, there has been a shift to an increased use of plastics and other composites for container and automotive products. The result is a significant over-capacity globally. On a small scale, there is also a shift from the use of steel to aluminium for container and automotive products that is exacerbating the situation in the steel industry. The impact of and adaptation to this situation varies by region:
- Western Europe - In an advanced stage of consolidation, such as the Usinor merger, aimed to increase market prices by reducing overall capacity and competition.
- North America - Struggling to achieve the consolidation necessary due to the high economic and social cost of plant closures.
- Asia Pacific - The last region to feel the effects of over-capacity, and is just starting the consolidation process.
Complex supply chains are emerging as a consequence of industry consolidation. Opportunities include: lower costs, faster response to customers, flexible product sourcing and more efficient distribution strategies. Understanding customer needs while managing metallurgical and mill capabilities reduces overall processing time, a key element toward gaining marketshare.
In the US and Western Europe there have been significant IT investments in the past five years. These opportunities have often been captured by the general purpose manufacturing supply-chain solution vendors. These general purpose solutions have been unsuitable for the complex metals supply chain and consequently are difficult and expensive to implement. At this point, there has been only limited success and we are beginning to see some of these projects being abandoned, and new investments being considered. This trend is set to continue and will gather momentum as the general economic market conditions improve over the next 18 to 24 months.
Asian metals companies are lagging behind the West in the investment of supply chain solutions. This is partially based on a stronger market due to lower production costs, and the desire to focus investments on quality and productivity improvements. Historically, Asian companies would develop their own solutions but the competitive market conditions are compelling them to consider package solutions currently available on the market.
The metals value chain includes steel and aluminum mills, either integrated or non-integrated, specialty and mini-mills; converters and processors, finishing facilities, service centers and distributors, raw materials suppliers and finished goods channels.
Supply-chain management solutions impact all aspects of shareholder value and can easily generate a compelling value proposition for the metals market.
In conclusion, metals companies have many legacy information systems to support their operations. Redefining supply chain networks to maximize efficiency and adopting new business processes such as build-to-stock/finish-to-order allows metals companies to achieve extremely competitive lead times in a profitable manner.
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