Productivity Improvement in a Steel Industry using Supply Chain Management Technique

Abstract

Cost reduction is one of the methods applied for improving the productivity of organizations. In productivity literature, particularly in nonparametric methods, cost reduction related methods are regarded as input oriented models. This paper presents a Supply Chain Management (SCM) model in which purchasing iron ore and coke from different resources, along with production and distribution of steel products were investigated to improve the productivity of a steel making plant in Iran. The model was designed based on a single objective concept with a focus on total cost minimization. The constraints of the model consisted principal restriction concerning mines, coke plant and products. The model was implemented in steel factories (blast furnace) affiliated with Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO).The results showed that the priority for providing iron ore should be given to Iran Central Iron Ore Company (ICIOC) which has enough production capacity to satisfy the required ores. The results further suggested that at the best productivity condition, Isfahan steel plant should focus on the beam and bar production. The other plants, i.e. Zagros plant, should focus on L-beam and slab and finally Meibod steel plant should concentrate on slab production. It was also showed that the coke production plants cannot supply the required tonnage of the steel plants. Therefore, some new plants should be established to achieve self-sufficiency in this industry. This model can be used as a support tool for decision-makers at strategic and tactical decision levels.