Case study - steel plant viability.
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Case Study Examples - Consulting Support

Steel plant viability - profit improvement


  • Client: The client for this project was a Government body, concerned about the viability of a major steel plant (and especially the employment consequences of steel plant closure). This client had little understanding about how steel plant viability might be defined, or how far the particular plant was from attaining such viability.

  • Issue: In MCI's view, the essence of the problem was the cost competitiveness of the plant in question. The main issue therefore was the question of how the operating cost performance of this facility could be improved.

  • Objective: The project objective was set at (i) defining what was meant by steel plant viability and (ii) then quantifying the requisite performance improvement, and the means to achieve this goal within a 12 month time horizon.

  • Focus: MCI defined the ex-works cost of slab as the main focus of the cost assessments. Cost benchmarks were prepared for all major producers of steel slab worldwide, including the particular plant of interest; and viability was defined in terms of positioning the plant in the top decile of cost performance. This in turn allowed a quantification of the magnitude of the business turnaround expressed as a $ per tonne slab cost improvement target.

  • Deliverables: The main consulting deliverables included assessments relating to the changes in purchasing and operating practices that would be necessary to achieve the steel plant viability target within 12 months. The deliberations also included discussions relating to other initiatives (already under consideration) that would have little relatively impact, with explanation of where the 'bang for the buck' really lay.

  • Contract: MCI typically undertake a project such as this based on a written proposal which is sent to the client prior to project commencement. Such a proposal can be a 20-30 page document, but for a short assignment of several days' duration our preference is to have a short and simple written agreement that sets out the process, task duration and total cost of the work. An advance of ~40%-50% of total fees and expenses is usually required.

  • Experience: MCI have undertaken cost benchmarking assessments for both carbon and special steels, with emphasis on both semi-finished and finished steel products. Our experts also have a good understanding of freight costs for transport of steelmaking raw materials; a matter that can be important for optimising raw material purchasing.

See other case studies, such as the banker the sales manager or the shareholder.

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