With U.S. integrated producers operating at full capacity, the rising costs suggest that steelmakers can reduce expenses by leveraging capital investments throughout the supply chain. Steel producers could chop a lot of excess expense from their bottom line, the AISI report says. If they had reduced these costs by just 5 percent in 1995, their return on sales would have jumped from 4.5 percent to 6.7 percent. To lower outlays for materials and supplies, producers must reduce MRO inventory, manage the product mix more efficiently, optimize freight systems, and create value-billed processing. Producers should view it as part of their overall corporate strategy.
Steelmakers look at inventory turns to monitor the performance of their supply chain.
Inventory levels aren't expected to change dramatically over the next six months, according to a recent survey by the National Assn. of Purchasing Managers' Steel Committee. As steel customers push for shorter lead times, the number of inventory turns is key in determining how effectively a steelmaker is reducing inventory carrying costs and increasing customer satisfaction. Upgrading outmoded software Steel producers have been operating mills with outmoded, non-functioning information technology installed in the 1970s and 1980s. Mills continue to use software programs written during this period, although their long-term viability to provide adequate business solutions is doubtful. Even hardware from this time is no longer maintainable by service contracts.