coping with restructuring [organizational restructuring]

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30 IEE Manufacturing Engineer | February/March 2005 www.iee.org/manufacturing RESTRUCTURING CAN HAVE A TREMENDOUS IMPACT ON OPERATIONS PLANNING, AS CORUS DISCOVERED AT ITS SCUNTHORPE FACILITY By David Coates, Bart MacCarthy and Jane Guinery

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Page 1: Coping with restructuring [organizational restructuring]

030-035_ME_FebMar05_EK 3/2/05 12:48 pm Page 30

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RESTRUCTURING CAN HAVE A TREMENDOUSIMPACT ON OPERATIONS PLANNING, AS CORUS

DISCOVERED AT ITS SCUNTHORPE FACILITY

By David Coates, Bart MacCarthy and Jane Guinery

30 IEE Manufacturing Engineer | February/March 2005

Page 2: Coping with restructuring [organizational restructuring]

Restructuring

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Corus, the international metals group, is alarge and complex business competing in adynamic market place. With the pressureson the company to manage its businesseffectively and responsively, there is acontinuing need to re-evaluate business

structures. This article looks at the impact of suchrestructures on production planning, scheduling andcontrol (PSC) activities and their organisation within CorusConstruction & Industrial (CC&I) within the Long ProductsDivision. Through understanding the current practices inPSC, we can examine the ways in which decision-makingneeds to be supported in periods of organisationalstructural change.

The lessons learnt are not only relevant to businesseswith similar characteristics and issues to Corus, but arealso applicable to many other complex businessesundergoing structural change.

CC&I is a member of a cross-sector business consortiumcontributing to a research project called Prochart, with theobjective of developing an improved understanding of realworld PSC practice. The project work, which has been

undertaken with researchers from the OperationsManagement Division at Nottingham University, hasinformed many of the insights presented below.

CC&I at Scunthorpe is an integrated steel site withinCorus, producing approximately 4.5 million tonnes of steeleach year for customers around the world. A total of fiverolling mills are located at three different UK locations.CC&I, like many large businesses, is being reorganised into

smaller units in order to increase control andaccountability. However, while smaller units have their ownperformance requirements and want to be masters of theirown destiny, it can bring them into conflict with the overallbusiness requirements. The challenge is to allow thesesmaller units to enjoy the benefits of being independent,while staying within the overall business plan. In thisarticle the PSC processes we focus upon are at the loadcontrol level that manages the master production scheduleand associated plans.

REDESIGNING BUSINESS PROCESSES Some systems analysts may take the view that, when arestructure occurs, business processes can be easilyredesigned through a logical process. In reality the businessprocesses are both complex and dynamic and must evolveto accommodate change. Even where new organisationalstructures are introduced with reassignment of roles andresponsibilities, the actual activities and interactionsbetween functions, groups and individuals must evolve. Tounderstand these issues for PSC it is necessary first toreview the environment in order to recognise the issues thatmay need to be addressed.

CC&I’s products effectively compete in a commoditymarket, so demand has to be managed very carefully toensure the most profitable work is selected. However,premiums are often achieved from last minute orders that,by their nature, are the most difficult to plan. The steelmaking facility supplies a number of mills and thereforeits output needs to be shared between them to optimiseproduction efficiencies over the whole production system.This results in different mills and their associatedcommercial functions vying for steel making production.As liquid steel manufacture is the constraint in the overallfacility, demand has to be carefully managed to ensure thereis no over commitment and the best margins are achieved.

The whole operation is vertically integrated (fig 1), withsteel making supporting the five rolling mills as well asother Corus business units and external customers. CC&Ihas been restructured to include three sub business units(Scunthorpe Cast Products, Sections / Plates and Wire Rod),each of which now exists as a separate business with itsown commercial and sales teams responsible for its specificrange of products.

Compounding the difficulties associated with marketvolatility and the optimisation of the vertically integratedprocesses is the substantial process output variabilityresulting from process failures, as well as liquid steelspecifications falling outside of its intended composition,an inherent part of any steel manufacturing process. Theserequire immediate schedule changes because any liquidsteel that is off specification has either to be modified ➔

IEE Manufacturing Engineer | February/March 2005 31

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through the secondary steel making processes, orreallocated to alternative outlets. Inevitably, such reroutingand allocation decisions need to be made very responsivelyas the process cannot stop.

Each batch of steel that is produced is divided between arange of orders, which can go forward in billet, bloom orslab form to different mills and customers, presenting anumber of co-ordination and allocation problems.Normally in discrete products manufacture, problemsassociated with effectively managing batch processproduction are overcome through process decoupling wherestocks are held between primary and secondary processes.This approach cannot be applied during liquid steelmanufacture and, while semi-finished stocks are held infront of the rolling mills, stock levels need to be minimisedin order to reduce costs.

GOOD PRACTICEWith Prochart the intent is to identify good practice withinPSC and, as this will vary substantially for differentbusinesses in different situations, the factors on which suchpractice is contingent. The project has developed a PSCprocess redesign toolkit that encapsulates thisunderstanding as design rules that may be applied to a widerange of manufacturing businesses. The toolkit can beapplied to inform PSC design decisions where general

E Manufacturing Engineer | February/March 2005

improvement in PSC performance is required or where PSCorganisation and processes need to be reviewed due toorganisational change.

In a business as complex as CC&I it is vital that overalloperations are effectively co-ordinated. The load controlfunction within logistics takes an overview of the business,producing forward plans that detail forward liquid steelproduction including where this steel is to be distributed,not only to internal mills but to external customers.

To provide a plan that suits the overall strategy of thebusiness and that is within business capabilities, the loadcontrol team needs to have an overview of commercialissues, production capability and the status across all thevertically integrated supply chains. Knowledge needs to bedrawn together from a variety of different sources withinthe business, and this was accomplished in 1966 by settingup an order management team (OMT) that incorporatedmanagers and specialists from different functions –commercial, finance, technical, scheduling and planning.The team reviews forward operations formally on a weekly

A significant element of the PSCprocess consists of the peoplewho manage it, their roles beingvital to handle choices in adynamic environment

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Queen AnneQueen BessQueen MaryQueen Victoria

Scunthorpe Ironmaking

Scunthorpe Steelmaking

3 Vessels

Secondary SteelmakingVacumDegasser

LAF (x2)Argon Stir

229/305mm 750/355mm 283/230mm330/254mm483/305mm

120mm140mm180mm

SlabCaster (2)

Bloom 750Caster (4)

Bloom 483Caster (6)

BilletCaster (8) Cast Bloom 483

S’groveHayangeW’tonCES

Cast BilletCMBNiagaraHomeExport

Rolled BloomCMBNiagarHomeExportBrinsworthCESW’tonMannstaedtMedium Section

MillScunthorpe

Rod MillHeavy Plate

MillTesside Beam

MillDalzell Plate

MillCut-up Line(platesub)

TCPSlabDalzell

TBM

TCPBloomTBM

CSP CoilsCUL

(plate-sub)

Slit slab

BBM

Corus Construction & Industrial

CES Billet

Fig 1: CC&IIntegrated Processes

basis, although informal daily contact is maintainedbetween members where appropriate. Decisions made bythe team, particularly on shared steel supply betweendifferent sub businesses and external customers are thentaken back to their relevant functional areas allowing thetransfer of knowledge to other decision makers; inparticular influencing sales team management on orderintake and instructing scheduling and production onforward production requirements.

PROBLEMS AND SOLUTIONS PSC consists of managing a process, having ‘know-how’ asopposed to ‘know what’ knowledge. Networks are extensiveand, while close relationships are supported through co-location, there are also relationships bridging functionsand planning levels that are based on contacts made overmany years.

PSC problems are often ill-structured with limitedinformation availability leading to decisions being made,not by rationally weighing up all the alternatives, but byrecognising the problem and identifying solutionssequentially until a practical one is found. Experiencedstaff have the knowledge to do this and an awareness ofthe situation, so know the implications of availablechoices without performing in-depth and timeconsuming analysis.

The judge-adviser approach to decision making isobserved in CC&I in which forward production, sales andstock plans are presented to the management committee ona weekly basis, often with alternative options andrecommendations. In this way the senior business ➔

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SystemInformation

Flow

DecisionPoints

PeopleInformation

Flow

Decisionpoint

Decisionpoint

Decisionpoint

Decisionpoint

Decisionpoint

Decisionpoint

PSC Process

Data

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Fig 2: The holistic nature of PSC

Sales

Decision Frame: Strategic planningto load control

Decision Frame: Load control tooperation planning

Decision Frame: Operations planningto scheduling

Roles: DirectorsFunction: Business planning

Customers

Roles: Cross functionalFunction: Capacity & Production planning at MPS level

Roles: Functional-operationalFunction: Production scheduling

FacilityschedulerScheduler

for internalcustomer

Shopscheduler

Production

InternalcustomerInternal

customer

Planninginformation

system

Fig 3: Model showing the planning hierarchy

34 IEE Manufacturing Engineer | February/March 2005

managers are made aware of the impact of alternativedecisions they can make at their level.

A significant element of the PSC process consists of thepeople who manage it, their roles being vital to handlingchoices in a dynamic environment. Through observationalresearch it was identified that individuals workedextensively within informal networks that appear to remainintact irrespective of business restructures and theirassociated reorganisation. In times of change there may bea lack of clarity in relation to roles and job titles but therestill remains within the networks a clear view on whoknows what about specific problems and solutions.Members of these networks share objectives andunderstanding of PSC, keeping each other up to date onrequirements and work status. The implication is that,while the organisation structure is formally changing, thenetworks are making operational adjustments to maintainthemselves. Where necessary they build in workarounds toincorporate previously-established decision makers andthey continue the practice of problem solving based on wellestablished paradigms and implicit rules.

VIEWING THE OVERALL SITUATION PSC practice, as it adapts, may be forgiving of inappropriatestructures but may also create inertia. If the restructurecreates advantage in other aspects of the business thisforgiveness may be valuable. If the intent is to improve thePSC process itself, this self-regulating effect may constitutean inability to change and be viewed as inertia. Even so, inthe former case, it may place unfair reliance on the informalaspects of the system, experts and workarounds leading tofuture difficulties and non-resolution of key issues.

In very complex and dynamic decision makingenvironments like the one described, where objectives aswell as the circumstances of the decision are highlyvariable and where there are multiple trade-offs affectingcommercial decision making, the decision makers need afull awareness of the overall situation. Further to this,where there needs to be shared decision making withelements of negotiation, then situation awareness alsoneeds to be shared. This can be facilitated through settingup appropriate teams and a working environment thatsupports informal networking. This can generate a sensemaking community in which individuals interact

PSC practice, as it adapts,may be forgiving ofinappropriate structures butmay also create inertia

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1. Scoping PSC

2. PSC Architecture

3. PSC Process

4. Hotspots

5. Key activitydecision content

Physical scope of analysis

PSC activities scope of analysis

Planning level requirements

Key activities and interfacerequirements

Gaps and shortfalls inactivities & interfaces

Planning interfaces

Opportunities for devolvingactivities

Achieving responsiveness

Formal v informal knowledgedistribution & sharing

PSC decision makingmechanisms

PSC roles & accountabilities

Hotspot type & location

Human contribution & roles

Information systems roles

Formalising decision steps

Assumes no change in operations managementand policies

6. Operationsredesignoptions

Physical resourcerestructure

Operations policiesas coping

mechanisms

Time alignment

7. Summary ofrecommendations

on:PSC architecture

&PSC processes

&Operationsredesign

Route A

Route B

A

B

Unit of analysis

Resource configurationclassification

Fig 4: PSC re-designtoolkit process

By implication, in achangeable anddynamic decisionmaking environment,such as thatexperienced in Corus,organisationalroutines predominateand need to besupported

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sufficiently to develop a shared language, shared knowledgeof situations and shared values and paradigms.

Grant has undertaken substantial research on theintegration of knowledge into organisations identifying twoforms of knowledge integration. These are direction thatincludes procedures, policies and directives, andorganisational routines that are the sequential patterns ofinteraction that individuals develop to permit theintegration of their specialised knowledge without the needfor communicating that knowledge. Grant posits that: “Theadvantage of routine over direction is in economising oncommunication and [having] a greater capacity to varyresponses to a broad range of circumstances”. Byimplication, in a changeable and dynamic decision makingenvironment, such as that experienced in Corus,organisational routines predominate and need to besupported.

The research has shown that, for complex, dynamicbusinesses, it is important to assess the impact of structuralchange on PSC activities:

1. Fully recognise the complexities of the business andthe impact of these on PSC and determine in what ways thecomplexities will change with structural change.

2. Know the current PSC systems and practices, andtheir strengths and weaknesses in relation to managingtheir specific business. Consider the impact the restructurewill have on them by reviewing: areas of expertise requiredin decision making, where it resides and the effect of the re-structure on its distribution; current practices and the

impact structural changes will have on them; reasons forthe current practices and whether these will, or should be,changed in the restructure.

Care must be taken not to dismantle current PSCpractices that are essential, effective and valuable. For CC&Ithese consisted of extensive informal networks, sensemaking communities and the organisational routines thatprovide coherence and integration across functions.

While views expressed in this article relate specificallyto CC&I, they should also be of value to other businessesinvolved in structural change.

The extensive research carried out with other partnersand by the whole consortium in workshops has led to thedevelopment of the PROCHART re-design toolkit, intowhich the lessons learnt at all the partners have beenincorporated. The toolkit has now been trialled and furtherdeveloped in a number of small businesses.

The toolkit provides a structured approach to analyseand improve PSC in complex businesses. Fig 4 provides anoverview of the toolkit re-design process in whichcharacteristics of a manufacturing business are analysedthrough a series of 20 worksheets to deriverecommendations on preferred PSC organisation andprocesses.�

David Coates is head of load control at Corus (CGI), BartMacCarthy is Professor of Operations Management atNottingham University and Jane Guinery is a research Fellow inthe Operations Division at Nottingham. www.prochart.org

IEE Manufacturing Engineer | February/March 2005 35