Mittal Steel is the pre-eminent operator in a very challenging and dynamic global steel market. Knowledge sharing and implementing best practice techniques is an essential ingredient of the group's success, but it needs to be underpinned by adaptable and robust performance management applications that allow it to optimise sourcing of materials, balance world-wide production and match it with demand on a global basis. Hyperion solutions are at the heart of its approach to Business performance Management (BPM). By implementing tightly integrated management applications and processes that engage with operating units at every level of the organisation, it is finding that it is not only able to respond to the challenges of the marketplace, but also support a process of constant learning and process improvement.
About Mittal Steel
Mittal Steel is the world's largest steel company, with shipments of 49.2 million tons and revenues of over $28.1 billion in 2005. It is represented in every segment of the steel market and produces a broad range of high-quality finished and semi-finished products for the flat and long products markets. It is also the most global organisation in its sector with its own steel-making facilities in 16 countries, spanning four continents and employing 225,000 people of 49 different nationalities. The group's shares are listed on the New York and Amsterdam stock exchanges.
The group is among the most efficient steel producers in the world. Its world-wide operations include all aspects of modern steelmaking, combining both integrated and mini-mill facilities and producing much of the iron ore and coking coal used in its furnaces. Its 5000 strong customer base spans 120 countries and includes household names in the automotive, engineering and appliance sectors.
Meeting the challenge of global markets with BPM
Sharing Knowledge has been at the heart of Mittal Steel's management approach since its first acquisition in 1989. The Knowledge Sharing Programme is designed to speed the flow of best practice and techniques around the Company. Operations support one another by generating product synergies and sharing know-how. All benefit from the improved purchasing power that scale offers and all enjoy access to world markets through a sales and marketing network that touches every corner of the globe.
Knowledge management is also at the heart of the group's management information systems. The philosophy of sharing knowledge across all of the group's operations and processes is inextricably aligned with the drive to implement a world class business performance management system (BPM), in which all key management processes are integrated and can share the same information on a timely basis throughout the world.
A solid BPM foundation is critical to allowing the group to benefit from its global scale, by leveraging its purchasing power, optimizing its production and managing its sales in a volatile and dynamic global steel market in which raw materials, output prices and exchange rates can fluctuate wildly from one trading period to the next.
Managing growth
The very rapid growth of the Mittal Steel Group has been a constant challenge and even insiders, such as Guus Hollander, responsible for financial and management reporting in Europe, have been surprised by the speed with which the Group has dominated the global stage. "The group has grown very quickly through acquisition, especially during the last two and a half years and this put a strain on our old Hyperion Enterprise reporting systems. We need to be able to compare and analyse performance across all of our business entities and processes if we are to behave as one company. But our old systems simply lacked the dimensionality to allow us to take different views of the business and compare performance," he says.
So in 2005, the group embarked on an exercise to provide the BPM foundation it would need to underpin its growth and support it culture of knowledge sharing. At first the emphasis was on replacing the functionality in the old Hyperion Enterprise System but with more consistent alignment between management and financial information. The new HFM (Hyperion Financial Management Application) helped the group to cater for the complexities of its dual listings on the Amsterdam and New York stock exchanges, particularly in the areas of multi-GAAP and multi-currency reporting.
But it was in the areas of management reporting that the Hyperion BPM platform allowed the group to make real strides. Management workshops identified key drivers of performance and KPIs that would allow management to understand trends and dynamics within the business and support timely decision making. Hollander explains, "We have weekly conference calls for each functional area which look at the actual performance of that week, with each unit providing a commentary on key areas of production, shipments, orderbook, prices, costs, financial results and so on. In the past, everything was in separate non-standard Excel spreadsheets but since the implementation of HFM we have rolled out web based data entry forms and we can control the process much better. Not everyone is using web based data submission because communications facilities in some parts of the world are too primitive but at least the Excel spreadsheets are now standardised around a consistent data dictionary." Most of the information used is report based, but Hollander and his team have implemented a performance dashboard using Hyperion Analyser. There are plans to roll this out further.
Information is a two way street - Mittal's BPM Vision
"BPM allows us to take a more integrated view of the business as a whole and not just as separate businesses. We need to be able to look in detail at different functional areas, such as production, procurement, sales and marketing but glue them together in a common process. However, it is very important that users have the information that they need to work with as well as providing information required at a group level," says Robert Vroklage, responsible for BPM roll-out within Mittal Steel.
"By interlinking the key processes we can optimise our performance in a way that we could not achieve before. For example, as a global organisation we constantly need to know where we should source our raw materials, which plant we should use to produce our steel and which markets we should prioritise for sales. By linking our information in a consistent way we can make good management calls," he adds.
Benchmarking performance with BPM
A key development in Mittal's BPM architecture has been the development of a "Cost Benchmarking" application using Hyperion Planning which looks at production effectiveness. It focuses on the variable costs of steel production, looking at process inputs, quantities, consumption, yields and costs. It allows a full comparison of variable costs by each manufacturing process, by each unit and on a global basis. After seven months operation, the group is seeing very real benefits from the application.
"It has been very successful and gives full transparency of performance," says Hollander. "The application contains a huge amount of data but it's given us a consistent way of looking at variable costs of production and the information is available to all of the contributing business units and process owners. They can benchmark the performance of every process with another operating unit, comparing say one billet mill with another and learn how they can enhance their own performance. This is important because it is difficult to swap production from one plant to another and it also allows regional management to make decisions about sourcing," he adds.
Crucially, the application also provides support for monthly conference calls of process owners. "Based on the cost information everyone who owns, say, a blast furnace, can invite key people from around the world to share best practice and techniques. The application is adding real value and spawning process improvement projects around the group."
"The cost benchmarking application was received very well and went better than most people could have hoped for. It provided meaningful information and everyone saw the added value."
Encouraged by the early success of the cost benchmarking application, Hollander and his team have implemented a sales and marketing application and are in the prototyping phase of a raw materials procurement application as well. The sales and marketing application predicts sales by product, region, price and tonnage on a twelve month rolling sales plan. "It helps us decide what materials to source, where to buy and produce and which products to sell in each country," remarks Hollander.
BPM has its challenges of its own
In some ways, the implementation of BPM in Mittal Steel is a victim of its own success. Developing integrated global applications on this scale requires the collection of huge amounts of data. "We are probably dealing with around three times the amount of data that we used to have and this has implications for infrastructure and data collection. We are piloting Hyperion Upstream Software and hope to automatically import as much as eighty percent of our data requirements from source systems using this facility. Similarly we plan to manage the integration of our three core management applications using Hyperion Metadata Management," says Vroklage. But keeping management on the same page is also a challenge. "Each new requirement in the business can give rise to a change in the underlying data model but we need to ensure that a change in one place does not give rise to an undesirable change somewhere else. This is not a systems issue as such, but more a feature of the true demands of BPM in practice," says Vroklage.
The biggest challenge now is to balance the needs of individual operating units with the information needs of the Group. "We are rolling out the principles of the cost benchmarking application to the operating units so that they can embed best practice planning at a very detailed level in their businesses. It's a cornerstone application and the challenge is to align their planning processes at a detailed level with the information needs at a regional and group level so that they can all share the same information and dimensions. It's a bottom up approach because we want to gain their 'buy –in' to the development and we are working as a joint project team." In the fullness of time, Hollander hopes that the planning processes will be aligned with the five year strategic plan, in a fully fledged BPM implementation.
Rob Bieshaar of fiNext, Mittal's implementation partner for Hyperion applications, has worked with the group for around four years as it pursues its BPM vision. "There is no doubt that an integrated approach using a BPM framework helps companies such as Mittal become global leaders. It cannot be implemented all at once and I believe that Mittal has managed implementation at a pace which is appropriate to the growth of the business. Integration challenges remain but the group is well on its way to delivering on its BPM vision," he said.
Conclusion
Mittal Steels has made notable strides with BPM. Reflecting on the implementation to date, both Hollander and Vroklage are pleased with a number of the group's achievements. "The business is operating in a very dynamic global marketplace and it is essential that our business applications can be aligned very rapidly with our business needs. For example, when the European business group was set up mid last year, it was a major change that was critical to the organisation's development. Key senior people in the regions needed information to support their new roles and so that they could make strategic decisions. Hyperion solutions allowed us to make the changes very swiftly and get information to the right people at the right time, without using spreadsheets. It was a major achievement" adds Hollander.
Related FSN articles
"Meeting the challenge of performance reporting under the EU Accounts Modernisation Directive"
