Fletcher Steel's i2 deal pays off

By ADAM GIFFORD

A performance audit of the Fletcher Challenge Steel Group's i2 implementation has found the supply chain optimisation software has paid for itself several times over in savings, efficiencies and customer satisfaction.

Ray Te Whiu, who finished last week as the group's national planning manager, said i2's TradeMatrix Factory Planner solution was installed in 1998 for about $600,000.

Few New Zealand organisations have deployed the United States-made software because of its cost and the perception that it was mainly suited to extremely large organisations.

Mr Te Whiu said it paid for itself within a year, and the savings continueD. Fletcher Challenge Steel had revenue of $121 million this financial year.

It has four separate businesses at its Otahuhu site. A steel plant produces the base commodity. A rolling mill takes 97 per cent of that steel to turn into reinforcing bars, angle bars and other large units.

About a third of its production goes to the wire mill, and a percentage then goes to the Cyclone fabrication plant to be turned into things like fencing products, staples, barbed wire, reinforced mesh and nails.

"All four mills were on the same site, and between them were huge mountains of stock to cover the inefficient practices of the plant," Mr Te Whiu said.

The main bottleneck was the wire mill.

By using i2 for production scheduling, there had been a 25 per cent increase in throughput from the same Machines.

Much of this has been achieved because they are now able to group products with a short set-up time between each run.

"We used to run 100 tonnes of one product, do a two-hour setup change, then run 100 tonnes of another product.

"Now we may do the 100 tonnes in 10-tonne blocks, with a 10-minute set-up between each one."

The result is delivery performance - getting the specific product to the customer at the promised time - which has improved from 30 per cent to 95 per cent.

"We had horrible customer service performance. We had people yelling down the phone every day, asking where their steel was," Mr Te Whiu said.

"Now we have a good reputation for on-time delivery, particularly from the wire mill and Cyclone."

Lead times for the most common lines had been reduced from six to two weeks.

Overtime had also dropped by 60 per cent, he said.

Instead of loading on the work over winter, when farmers do their fencing, the mill was able to identify times to produce and stockpile the needed wire during the normal production cycle.

There had been a 90 per cent reduction in obsolescent stock, such as wire which hangs around too long so its galvanising goes white, and a similar reduction in stock-outs.

There had also been a 90 per cent reduction in interruptions to the production process.

This was caused by someone needing to jump the queue to get a particular order filled.

Production planning for the week, which used to take 40 hours wrestling with Excel spreadsheets, now took two to four hours.

This allowed the production planner to get involved in high-level planning, further cost-reduction strategies and customer liaison.

Mr Te Whiu said many companies were still using standard MRP (manufacturing resource planning) software for production scheduling.

"They're too slow and not really responsive because it sits within a bigger system which also does financial, distribution, payroll and so on."

Mr Te Whiu said that the i2 software gave Fletcher Challenge Steel the potential to treat all four mills as a single manufacturing facility.