Development and Application of an Integrated Approach to Reduce Costs in Steel Production Planning

Steel manufacturing is critical for industrial development and contributes greatly to the world’s energy consumption. A worldwide oversupply of steel has led to increased competition in the market, requiring developing countries to function on the same level as developed countries. Since energy use contributes between 20 and 40% of steel production costs, a reduction in energy consumption will result in decreased production costs, and increased competitiveness. This study therefore focuses on the development and application of an integrated approach to reduce energy costs in steel production planning. This is a new solution, as a review of existing research indicated that there is a lack of an integrated steel production planning model and application thereof on marginally profitable facilities. The key novelty lies in the integration aspect of the solution — both in terms of integrating different initiatives and different sections of such a facility. The proposed approach provides an opportunity to adapt outdated production planning methods without the use of capital, and simultaneously address resistance from personnel at these marginally profitable facilities in developing countries. The new cost model focuses on the identification, evaluation, comparison, prioritisation, implementation, and integration of steel production planning initiatives. The integration determines the effect that individual initiatives have on each other, and dynamically prioritises solutions by combining theoretically quantified benefits with practical constraints. Two initiatives were implemented on a South African facility, with an estimated cost benefit of US$0.83 million per annum (approximately R13.3 million per annum).