Case studies

Business impact

Improving production material utilization and increasing delivery performance

Issue

Customer demands for shorter fulfillment cycles were having a negative effect on profitability because of the higher production costs associated with increased surplus (partly used steel slabs). POSCO needed to improve production capabilities by fulfilling the orders more efficiently.

Executive summary

POSCO was able to lower production costs and respond to new customer demands by applying IBM Research's production design and operations optimization capabilities.

What IBM did

Meeting customer demands on time is POSCO's forte. The problem was that shorter turnaround times meant more surplus material. Reducing that surplus was an absolute necessity.

To meet both customer and company needs, POSCO needed to maximize average slab weight and reduce slab surplus. IBM Global Business Services consultants worked with researchers to fully understand POSCO's problems and formulate them so that optimization algorithms could be used. The objective of improving slab utilization was central to the three main problems solved: material allocation, slab design and cast design. The IBM researchers then developed packing, matching and sequencing algorithms to solve various components of these problems.

One of the new capabilities IBM introduced to POSCO is the ability to pack multiple orders on a slab. Although this capability is very effective in improving slab utilization, it made the solution harder from a computational and programming perspective. Still, the team met the challenge by combining expert knowledge of steel production with advanced optimization techniques to effectively increase average slab weight and reduce stock slabs and unused-slab weight, while increasing delivery performance.

Capabilities applied

The IBM Steel Industry Solutions Group applied expertise in advanced techniques from operations research, knowledge of primary steelmaking processes and artificial intelligence to optimize multiple aspects of the steel production process.