Arcelor Mittal

Strategic Supply Chain Optimizer – AMT (ArcelorMittal Tubarão)

Based on Mixed-Integer Programming and integrated with SAP APO (SNP Module), a model was developed for optimizing the strategic planning of AMT’s supply chain. This model supports optimized and integrated calculations for production, distribution, strategic inventory and sales, according to each client’s profitability as well as the logistics and production capabilities of AMT and its subsidiary Vega do Sul.


ABOUT ARCELORMITTAL

AMT had just kicked off its expansion plan from 5 million to 7.5 million tons per year, including plates and flat-rolled products, by building new production plants, such as a new blast furnace, a coking plant (SOL Coqueria, with output capacity of 1.5 million tons per year) and a continuous casting machine.

The corresponding investment of nearly 1 billion dollars allowed AMT to reclaim its leading position in the slab international market – part of its plate production was being used in a Hot Strip Mill of 2 million tons per year.

After an analysis by IBM Global Business Services, AMT adopted SAP – APO as its strategic planning tool. At that time, the basic questions to be answered by the new tool were: (a) how to sell ATM’s expanded capacity in an optimized manner (the ideal product mix) and (b) which costumers (and at which level of service) should be selected in order to maximize profitability given the increased availability in the several productive areas.


THE CHALLENGE

AMT adopted APO due its native integration with SAP ERP as well as its transactional functionalities, such as embedded workflow and middleware. Nonetheless, the team realized that some of their business requirements were not met by APO. The optimization of raw materials (liquid steel and scraps) in the converters and the usage of a profitability-based client list were examples of such functional gaps. Thus, UniSoma was invited to develop an alternative optimization component to the native SNP engine that would meet the requirements of all involved areas (Production Planning, Logistics and Sales) in the supply chain planning process.

 

THE SOLUTION

A generic Mixed-Integer Programming model was developed to support 2 similar applications. Both are based on AMT’s supply chain representation, including locations such as manufacturing plants, distribution centers, branch offices, clients and transport lines connecting these locations.

The first use of the application was designed for the Sales Department of AMT. It is, in fact, an S&OP (Sales and Operations Planning) tool that supports the sales team and marketers to define the optimal client portfolio from a profitability standpoint.

The system takes into consideration constraints such as productive capacities and the product mix of clients – the model ensures, for each selected client, the fulfillment of their mix of products, based on their profit margins.

The second use of the application was designed for AMT’s Production Planning Department. It supports the creation of the Business Plan according to monthly “time buckets” up to 5 years in.

 

THE RESULTS

“The UniSoma team developed and validated the operational prototypes of the Portfolio Simulation and the Business Plan. In addition to creating optimized plans, the tool allows us to identify opportunities in pricing, variation in the demand and acquisition of materials, assessing their impacts to the product mix and fulfillment of demand for the selected portfolio.”

Márcia Schwarz de Assis
Systems Analyst and Project Manager
AMT IT Department

“The Optimizer developed by UniSoma is considered the heart of the system, the most important part of the project. It optimizes the demand based on the client’s profitability, a requirement that we didn’t find in any package. It tells us which are the most profitable clients on CST and Vega do Sul.”

Márcia Schwarz de Assis
Systems Analyst and Project Manager
AMT IT Department

English