unisoma reduction and utility integrated tactical planning

Reduction and Utility Integrated Tactical Planning

In 2009, UniSoma developed and deployed at ArcelorMittal Tubarão, a decision support system, integrated to their SAP® solution, for optimized and integrated planning of Reduction and Utilities areas.

Problem Description

During 2007, UniSoma developed an Optimizer for the Strategic and Tactical Supply Chain Planning at ArcelorMittal Tubarão (called SCM Phase 1) which determines the production and distribution levels that maximize the company’s profitability. The Optimizer, designed to replace SAP’s® native engine SNP®, solves the integrated balance of production, storage, distribution and customer demand levels, while detailing all manufacturing processes, from Blast Furnaces to finishing and dispatch areas, every month during a typical 1 to 5 year horizon.

The results generated in SCM Phase 1 (such as the production levels at the hot strip mills) are used as inputs for the capacity utilization planning at resources in the Reduction (ex: Coke plants, Sinter mills, etc.) and Utilities (ex: Oxygen plants, Calcining kiln’s, etc.) areas. At the time UniSoma was invited for this project, ArcelorMittal planned these areas using a customized Supply Chain Planning solution provided by PeopleSoft®, which, due to lack of optimization functionalities, did not consider (simultaneously and in an integrated way) all the resources and materials involved in the process. Due to this, end-users treated the problem in an iterative manner, generating isolated plans for each area, that is, generating plans for a critical area (regardless of synergetic interactions and only estimating material exchange between different areas), then using the obtained values to generate plans for another area, repeating the process until no more plans were required. This process consumed valuable analyzing time, making it impossible to simulate scenarios or, if needed, reprogram the current scenario, and did not identify economical opportunities.

The Challenge

In January 2009, ArcelorMittal Tubarão invited UniSoma to develop and deploy a mathematical model, integrated with SAP® and the SCM Phase 1 Optimizer, which could replace PeopleSoft’s® Supply Chain Planning module and generate the integrated and optimized balance of Reduction and Utilities areas. Besides generating optimized plans, the solution should identify opportunities for raw material purchase and surplus or by-product sales (such as electrical energy or tar).

The Solution

During 2009, UniSoma developed SCM Phase 2, based on a mathematical programming model, used to generate optimized prescriptions for the tactical planning of Reduction and Utility areas. The system calculates the integrated balance of all involved materials (be it raw material, intermediate, final or co-products), which implies in determining consumption, generation and storage, as well as purchase needs and sales opportunities (of surplus or by-products), maximizing the contribution margin for the planning horizon. This is a complementary system to that developed for Strategic and Tactical Supply Chain Planning for AMT. Similarly to that system, SCM Phase 2 also replaced the native APO® optimizer.

The model indicates the optimal operation level of production resources and their respective processes, corresponding to represented areas. Production plans are generated compatible with finite or infinite resource capacity, material loss during processing, minimal production resource usage and their operating rates.

A production resource capacity can be reduced by maintenance, scheduled or not, strategically determined reduced usage and productivity reduction caused by lack of production synchronism. As a result, the Optimizer allows users to inform production stops during determined periods, so that production plans can be quickly adapted to the new operation conditions.

To calculate material balance, the System takes into account storage minimal (safety) limits and/or maximum (capacity) limits. Besides this, it allows for the definition of strategic stock at the end of planning horizon. To guide stock building decisions, obsolescence, deterioration and storage costs are compared to other direct costs and/or opportunities addressed by the model.

The optimizer considers, for example, the possibility of generating anticipated production plans in relation to the defined consumption, in order to take advantage of any resource capacity gap and to guarantee future needs (building a strategic stock of liquid oxygen, for example), an import feature when additional early production costs are cheaper than future raw material purchases.

To facilitate scenario analysis, the SCM Phase 2 System disposes of special features:

  • Parametric Curves: graphical tools which allow users to verify economical impacts on solutions while varying purchase or sales prices;
  • Economical scenario comparison: feature that allows you to compare the various economical effects of different operational and tactical scenarios in which, for example, new equipment was purchased as an investment or new raw material supply and surplus sales contracts are analyzed;
  • Dynamic Constraint generator: allows users to define production conditions of the various represented areas (for example, sintering and blast furnace mixing limits) to ensure plan adherence.

The system presents a user friendly interface for scenario building, optimization configuration and results analysis. Scenario building is based on data directly supplied by users and from SAP® and SCM Phase 1 System. The graphical user interface (GUI) also allows for result analysis from the Optimizer and different scenario comparison. Thus, users can quickly adjust parameters and proceed with new optimizations (without the need to interact again with external systems), and only output planning results to the ERP when the solution is properly validated.

The system makes use of URSO – UniSoma Remote System of Optimization, a technology developed by UniSoma which emulates client-server architecture for remote use. With URSO, users operate clients – which contain the fully functional user interface – and remotely access the model engine which is installed on an optimization server. This architecture supports multiple users and a given number of simultaneous server accesses. Due to the generality of URSO, access can always be revised, in case the number of clients increases or there is a need for more simultaneous accesses, including other AMT optimization models.

About AMT

AMT is an Arcelor Brasil S.A. Company, together with ArcelorMittal Longos and Arcelor Mittal Vega is a world leader in the steel slab market, responsible for 12% of worldwide sales volume, and is one of the largest companies in Brazil. Strategically located in the city of Vitória, the capital of Espírito Santos State, in eastern Brazil, CST has established itself as a supplier of high-quality semi-finished steel products (slabs and hot-rolled coils) for the automotive industry.



Eduardo M. Milanez,  Unisoma’s AIMMS Service Partner Page, Unisoma’s Website