Strategic and operational capabilities in steel production : Product variety and performance

Abstract: Steel producers that employ niche market strategies are continuously seeking to reduce production cost while maintaining adiverse product mix. The business model is typically based onmarketing of high–strength special or stainless steels. However,the desire to avoid direct cost competition is over time gradually leading towards increased product variety and smaller ordervolumes (tonnes per order) for each product. This thesis analyses how production cost is linked to productvariety in steel strip production. Results are based on new modelsfor assessment of opportunities for performance improvement inhigh product–variety steel production. The need for flexible production processes increases with increasing product variety. Operational capabilities linked to processflexibility determine the extent to which steel producers caneliminate in–process inventory and accomplish close coupling between process steps. Niche market producers that invest inprocess flexibility improvements can lower production costs bothdue to reduced work–in–process and lower energy consumption.An additional benefit is reduced environmental impact. The following problems are addressed: • Development of a method to assess the influence of productvariety on performance in steel production. • Development of models of continuous casting and hotrolling that account for product variety and cost effectswith consideration of varying degrees of process flexibility. • Development of a strategy process model that focus on thestrategic value of operational capabilities related to processflexibility. Investments in operational capabilities regarding process flexibility have a strategic impact. An appreciation for the effectsof process flexibility should permeate the organisation’s daily work since the accumulated contribution of many, seemingly unimportant, incremental changes significantly influences thestrategic opportunities of the company.