A case study of Nucor Steel Corporation
Nucor Steel Corporation was founded in 1897 by Ransom Eli, an auto manufacturer who formed the REO Motor as noted in Nucor-WOW.com. The corporation is headquartered Charlotte, North Carolina and it is the largest steel producer in the United States. Particularly, the corporation operates in three segments namely the Steel Mills, Steel Products as well as the Raw Materials. It manufactures many products ranging from the steer bars and decks as well as the cold rolled bars among other products for industrial uses. Given that the company requires a lot of project management due to the coordination of the equipment such as the furnaces and mill stands, it is rational to invest in the efficient techniques and technology. The corporation has many plants and a large number of employees. Therefore, to maintain competitiveness it has adopted two goals "building steel manufacturing facilities economically, and operating the facilities productively.” These are pursued through the employees’ engagement and motivation as well as adopting the modern technology and modern management tools. More specifically, the company employs the lean manufacturing technique. Nonetheless, the imported steel and the overcapacity of the corporation pose serious challenges to Nucor as indicated by Hill and Jones (2014). Figure.1 below illustrates the decreasing sales resulting from low-priced imported steel. It is evident that importers have strategic advantages such as low-cost production and structural benefits.
Figure 1
Source:http://seekingalpha.com/article/3300105-nucor-remains-challenged-as-imports-steel-the-show
As such, the paper will embark on rethinking the lean manufacturing in Nucor to lower the production costs to increase its competitiveness with the foreign steel.
Introduction
In light of the strong competition forces and the low sales in the company, the study seeks to apply a working lean manufacturing in all the corporation’s operations. In the first part, the paper will highlight the desired outcomes after the implementation of the lean manufacturing in Nucor Steel Corporation. Afterward, it will discuss the wastes to be eliminated as well as the processes to cut it. Finally, it will look at derived benefits from adoption of lean in Nucor and draw several conclusions based on the entire paper.
Desired outcome
Nucor Steel Corporation in the largest steel producer in U.S and thus its poor performance has many negative impacts on all the stakeholders in the steel industry. As such, there are several desired outcome of the proposed lean manufacturing in the company. Firstly, the aim is to achieve full capacity operation to increase the profit margins through reduction of the manufacturing and operation costs. Secondly, the process will focus on increasing the market share of the corporation's product as India and China have dominated the market among other steel producing countries. Finally, the process will aim at increasing the employment opportunities resulting from the full and efficient capacity operation of the corporation. As regards to quality, the corporation has a mark on the market with only limitations being the high prices compared to foreign steel.
Wastes eliminated
The lean manufacturing in the Nucor Steel Corporation will aim at minimizing a couple of wastes that increase the overall costs of producing steel. In the first case, the initiative will aim at reducing the inventory costs that hold a lot of liquid cash that could be applied to other cash generating activities. These costs normally encompass the excess raw material, work in process in all the plants as well as finished but not sold products because they incur the storage costs as well as the opportunity costs of the foregone ventures. More particularly, inventory requires space and transport, which may also lead to damaging of the items due to the frequent movement. These wastes lead to incremental costs due to damaged products and the storage expenses. Likewise, there is the transported waste due to the movements of the staff, employees and the inventory from one location to another as explained by CIRP International Seminar on Manufacturing Systems, Mitsubishi, Ueda, Kimura and International Academy for Production Engineering. (2008). Given that these movements add no value to the process or the products, it constitutes to the waste. Indeed, it consumes resources because of the wages incurred, wear and tear, and damages to the inventory. As such, the wastes cost the corporation huge resources which reflects on the high prices of the final products. Still, the manufacturing process yields waste defects that lead to recalling of the dispatched products to the customers. Notably, the waste is detectable when the products are delivered to the customers. The defects increase the manufacturing costs and lead to huge losses since the products have to be replaced by other items. Therefore, there are additional costs due to the replacement material and the paperwork involved in the replacement process. This may lead to losing the customer because of the delays that are experienced in reprocessing the orders recalled by the corporation.
It also experiences the overproduction and underproduction wastes due to the unpredictable demand and the insurgence of the low-priced foreign steel. Particularly, overproduction waste comes about when the company produces more products only to have low sales volume due to the cheap imports as explained by Wilson (2010). This leads to high volumes of inventory that occupies spaces and incurs storage and transport costs due to the movement of excess inventory. Eventually, the movement of the products may lead to damages. On the other hand, under production results from the underperforming of the corporation products leading to low production only to experience excess demand afterward. It causes increment costs of unit product due to the fixed assets and the idle resources in the plants. This lowers the competitiveness of the products manufactured by Nucor against the foreign steel importers. Moreover, the corporation goes through the waste in motion. Specifically, it occurs when moving the heavy equipment and machinery as well as the workforce around the plants. This consumes time and resources as well as causing job stress to the employees involved in the motion. This also leads to increased costs of wear and tear for the items and the carriers used to move the items. Finally, there is the over processing wastes that result from substandard techniques and red tape production methodologies in the corporation among other defects n the manufacturing plants as argued by Jack (2013). These wastes increase the defect rates while lowering the customer' satisfaction and also increases the manufacturing and operation costs. A corporation with one of the above wastes suffers from time wastage due to movements, replacement as well as delayed delivery of inputs used in the manufacturing process. Additionally, the machine breakdown due to insufficient engineers in the company results in time wastage.
Processes of eliminating wastes
Different wastes demand varied elimination processes to lower the manufacturing and the operation cost in the steel corporation. For instance, to cut the defect products, the management should install the cause analysis (RCA) process as shown by In García, In Maldonado and In Cortes-Robles (2014). In this case, the technique applies a systematic combination of problem-solving approaches with the aim of identifying the causes of products defect in the manufacturing plants. Additionally, the technique can be used in boosting the machine and technology reliance hence lowering time wastage resulting from the machine and equipment failure. Moreover, the defect can also be countered using the quality control and the resulting monitoring aspects in the manufacturing process across all the plants run by Nucor. In the case of overproduction and underproduction as well as the defects and time wastage, automation and computer modeling would drastically eliminate the wastes. For instance, there is the application of electronic data interchange in the entire supply chain in the steel company through the installation of the flexible manufacturing technique, automated storage, and warehousing as well as the advanced techniques such as the consumer response and agile manufacturing among other technological knowhow. This will be instrumental in determining the right production volumes and hence bypass over/under production and their consequential wastes.
Transport waste will be reduced through the change of layout, that is, the corporation should make sure that there are value streams. This will facilitate the value flow to a large number of the clients. Implied, the corporation should have steel production lines with the main focus to add value and not merely using the traditional functional layout. Additionally, the plants should minimize the distance between the operations units and where applicable, it should use small but efficient machines that are easy to transport considering that they have less weight and small size. Particularly, the corporation needs to implement the stream mapping as well as the process mapping; they are efficient regarding costs and time as clarified by Gopalakrishnan (2010). Moreover, the plants should make sure that the tools that are in use are within reach to avoid the unnecessary movements during working hours. Still, the heavy machines should be kept at waist level to avoid the lifting that wastes time and energy. Alternatively, the stores can be close to the working area to avoid movements, lifting and carrying of tools and inputs for long distance. Therefore, reducing the lifting waste will increase the output level and gear the corporation towards economics of large scale. Ultimately, cutting the discussed wastes will have a positive impact on the time wastes in the corporation since all the processes take the time to run.
Benefits of waste elimination to the operations and Nucor Steel Corporation
The fundamental essence of lean manufacturing is the continued improvement of the operations and the production of the entire corporation's processes. Therefore, given that all the noted wastes in the Nucor Steel Corporation are eliminated, there are lots of benefits that will be experienced. For instance, the cost per unit product will significantly go down due to optimal use of the available resources. Consequently, the Nucor's steel products will compete favorably with the steel from other parts of the world. Additionally, the wastes elimination will be vital in the streamlining the corporation's processes in all the departments and the production units. As such, the level of efficiency and the output per worker will be optimal. Likewise, this will build the employee's commitment and team skills since all the processes are independent. It is important to note that lean manufacturing works in the instances where all the team members focus on the tasks at hand and give their best to the manufacturing processes. Hence, the overall steel production will improve because of the cooperation and the commitment of the employees. Still, lean manufacturing will be instrumental in improving the quality of steel produced due to the increased level of commitment and application of technology in the plants. Particularly, this will cut the reoccurrence rate of the errors and the wastes discovered through the use of advanced technology. In the final analysis, the corporation will incur less manufacturing and operation costs. More specifically, the manpower will be reduced in the steel manufacturing as well as costs underwent due to defects and inventory among other wastes eliminated by lean manufacturing. Thus, the competitiveness and profit margin will improve because of efficient use of the lean processes.
Conclusions
There are key conclusions made from the analysis of the lean application in the Nucor lean manufacturing. Firstly, the study indicates that the manufacturing processes need continued improvement to counter the product and competition force. Still, the paper shows that the manufactures should identify all the wastes in their plans to optimize the benefits of lean manufacturing. Additionally, the study shows that efficient use of lean manufacturing increases the profits by cutting the labor costs, wastes and improving the quality of the products.
References
CIRP International Seminar on Manufacturing Systems, Mitsuishi, M., Ueda, K., Kimura, F., & International Academy for Production Engineering. (2008). Manufacturing systems and technologies for the new frontier: The 41st CIRP Conference on Manufacturing Systems, May 26-28, 2008, Tokyo, Japan. London: Springer.
Gopalakrishnan, N. (2010). Simplified lean manufacturing: Elements/components, Rules, tools and implementation. New Delhi: PHI Learning.
Hill, C. W. L., & Jones, G. R. (2014). Strategic Management: Theory & Cases: an integrated approach.
In García, A. J. L., In Maldonado, M. A. A., & In Cortes-Robles, G. (2014). Lean manufacturing in the developing world: Methodology, case studies, and trends from Latin America.
Jack, H. (2013). Engineering design, planning, and management. Amsterdam: Academic Press.
Nucor. (n.d.). Retrieved April 11, 2016, from http://us.wow.com/wiki/Nucor
Wilson, L. (2010). How to implement lean manufacturing. New York: McGraw-Hill.
