Metals Industry Braces For A Technological Disruption

Stefan Koch

You could be forgiven for assuming that innovation only happens in young or fast-moving sectors. Mature, commodity-based industries like metals hardly carry the sexy allure of, say, information tech or even automobiles. But that doesn’t mean you’d be right.

To the contrary, staying competitive in this industry requires innovation. You only have to consider the demands placed on metal companies to realize that innovation is happening all the time. On the topic of innovation for the products themselves, thousands of new patents for metal alloys are requested every decade. From spaceflight to automobiles to house and office building, these alloys provide an unparalleled strength.

Then consider innovation from a business perspective to support the changing marketing demands. Metals companies need to find solutions to be profitable in oversupplied, competitive, and constantly changing markets. Proven business models and business plans based on enormous capital investments in plants and assets will face significant challenges.

Leading companies are embracing the new paradigm shifts in technology and reimagining their processes, asset management frameworks, and customer relationships. This reimagination requires a digital metals business framework that overlays the production and distribution value chains of metal products. All participants – miners, primary metals producers, fabricators, and distributors – will use digital innovation to anticipate real-time demand and supply, enhance process excellence for operational efficiency, operate resilient supply chains, and innovate the customer experience.

Do companies like ArcelorMittal, Severstal, Kloeckner, NLMK, or Tata Steel really need to embrace the digital age? In one word: Yes. Here’s how they can – and are – doing so.

Better customer relationships

Leading metals companies are quickly embracing digital technology. This helps drive customer relationships, business process efficiency, innovation, and growth.

One company that has put a new emphasis on customer relationships is steel giant Severstal.

In order to secure value in the future, Severstal is reassessing and expanding its role as a cornerstone of the metals ecosystem.

With respect to Industry 4.0 and digital transformation, the company sees that a culture of accelerated innovations is incompatible with traditional ways of thinking, and it demands major cultural transformation from the organization – especially in how planning and execution impact customers. Severstal has been leading discussions with its customers, suppliers, and partners to make conscious decisions on where to follow change initiated by others, versus where to take a leadership role and drive change. Digital technology is giving Severstal more opportunities to understand its customers through their behavior and communicate with them through personalized experiences and online portals, with the goal being to manage the supply chain in order to best meet customer timelines and changing demand.

Here’s a specific use case for how technology can improve customer relationships in the metals industry: Customers expect metals producers to deliver on time as expected. But production schedules and quality outcomes fluctuate and can affect delivery schedules, which can cause problems for customers. So what’s the solution? Having a digital innovation system that allows metals producers to provide information about the products to help their customers react to changes. It also helps them understand how to better use, handle, or deploy a product. As a result, customers can adjust their own production plans. Or they can use quality data to change the welding power or decrease the heat level to save energy. Being able to provide the correct data to the customer about the exact location of the products could be an up-sell or value-added service, as well. The customer can plan more precisely because the expected arrival date is more reliable.

Responding to change – and being more sustainable

As metals companies begin reimagining their entire business, they need an IT architecture that provides stability for the core enterprise processes. They also need flexibility in areas where constant change happens, such as customer demand for innovation (e.g., products made from recycled material or high-strength steel). Efforts to reduce carbon footprint of metals production will drive new products that will also be easier to reuse, collect, and recycle. For example, companies will start offering metal rental as an alternative to purchase. Steel producers will offer new light-steel grades for cars and are already developing innovative ways to apply the new materials to avoid aluminum or carbon fiber becoming the material of choice.

As products become more intelligent and interconnected, we see big opportunities for producers. They can use sensors to both reduce costs and make sure they are producing exactly what customers order. Analyzing sensor data from machines helps predict possible failures early. The data also reduces unplanned downtime. Plus, it helps ensure product quality fits within expected parameters. For the mill products and mining industries, digital technology is helping by connecting customer information, assets, products and processes.

Versatile and revolutionary

From a consumer’s standpoint, technology is helping make transactions within the metals industry smoother and easier, not to mention producing products that are far superior.

As seen with Kloeckner, an international steel distribution company, innovations usher in product advances, software development, online marketing, and improved customer service. This promises more efficient processes and optimized data exchanges.

“Based on our digital solutions, we are redesigning all supplier and particularly customer-related processes to be simpler and more efficient,” says Gisbert Ruehl, CEO of Kloeckner & Co.

Quantifying precisely how much consumers or companies will benefit from technological advances is an exercise in futility. However, one thing is clear: The metals industry is undergoing a rapid disruption courtesy of innovations and technology. To read more about this transformation and how it impacts you, check out “Mill and Mining – Metals Industry in the Digital Transformation.”

A move to the cloud

Of course, any move towards digitization involves running in the cloud. For the metals industry, speed, flexibility, and cost reduction are the biggest drivers for moving to the cloud. Moving HR to the cloud is already common, and procurement is not far behind. Metals companies are also interested in integrated business planning functionality. They also want to leverage the cloud and make it simpler to access many sources for consolidation. They want to benchmark and compare different sites for their energy use.

Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Energy and Natural Resource Companies. Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?


Stefan Koch

About Stefan Koch

Stefan Koch is responsible for SAP solutions for the metal industry globally. In this role, he looks closely at all aspects of how technology can be applied to drive efficiency, innovation and growth across the metals industry. He is in frequent discussions with leading metals companies, industry user groups, technology implementation partners and independent software vendors. Presently Stefan is guiding a number of ongoing discussion with metals companies on how to drive Digital Transformation in Metals and to identify the role of Industry 4.0 and IoT in this context.