optimizing value in process manufacturing

7/27/2019 Optimizing Value in Process Manufacturing

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Optimizing value through anintegrated approach in theprocess manufacturing industryMicrosoft Services

Author:Guru Bharadwaj, Enterprise Strategy Advisor, Microsoft Services

Contributors:Bhasker Joshi, Ambar Mukherjee, Brian Loomis and Ellyn Foltz

Publication Date:September 2012

Version:1.0

Guru Bharadwaj is a distinguished strategy advisor and advises enterpriseclients on business and technology strategies. Gurus focus is to create andrealize business value through productive use of technology for Microsoftsenterprise clients. His expertise spans enterprise architecture, business andtechnology transformation, innovation, portfolio planning, and governance.

2012 Microsoft Corporation. All rights reserved. This document is provided "as-is." Informationand views expressed in this document, including URL and other Internet Web site references, maychange without notice. You bear the risk of using i t.

This document does not provide you with any legal rights to any intellectual property in anyMicrosoft product. You may copy and use this document for your internal, reference purposes. Thisdocument is confidential and proprietary to Microsoft. It is disclosed and can be used only pursuantto a non-disclosure agreement.

A MicrosoftServices EnterpriseArchitecture Paper

Enterprise Architecture


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Table of Contents

1. EXECUTIVE SUMMARY ..............................................................................................3

2. PROCESS MANUFACTURING INDUSTRY ................ ................. ................. ............4

3. STEEL INDUSTRY TRENDS ........................................................................................4

4. MARKET DRIVERS AND AREAS OF FOCUS ..........................................................6

5. TECHNOLOGY AS A KEY ENABLER ........................................................................7

6. ENTERPRISE ARCHITECTURE APPROACH ............................................................8

7. OTHER CONSIDERATIONS ............... ................. ................. ................ ................. ....10

8. HOW MICROSOFT HELPS ......................................................................................10

9. CONCLUSION ............................................................................................................13

10. REFERENCES ............................................................................................................13


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1. Executive Summary

The process industry as a whole and the steel industry in particular have startedto recover and are expected to experience double-digit growth in coming yearsbecause of increased consumption and utilization rates. Although productionand consumption levels have improved, volatility in mineral and raw materialprices as well as unpredictable demand call for a prudent approach tooptimizing operations and increasing their agility. Newer market trends andeconomies also require enterprises to identify flexible business models thatallow them to take advantage of inorganic growth and service revenueopportunities seamlessly.

In a business climate where enterprises are experiencing increased competitivepressure and shifting market conditions, organizations that thrive have definedcapabilities and frameworks that allow them to act quickly and decisively. Inturn, they can accelerate change to seize business opportunities. In such ascenario, technology becomes a key enabler in linking business strategies,processes, and operations uniformly across the enterprise fabric for better valuerealization.

Enterprise architecture as a discipline provides such a foundation for anorganization to align strategic objectives with opportunities for change. Whencombined with complementary approaches such as business processmanagement, master data management, and analytics, enterprise architecture

forms the key basis for value. Such a foundation is essential to realize greateragility and value with newer technology paradigms such as cloud-basedbusiness models, Internet of things, and big data analytics.

Microsoft, together with its industry partners, provides process manufacturingcompanies with integrated world-class solutions that enable business andtechnical people to conduct and optimize critical areas of their organizations.


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2. Process manufacturingindustry

Although the process industry as a whole suffered from the latest economicrecession, it started to recover and grow in 2011 and is expected to continue togrow through 2014. This recovery is supported by a slowly improving globaleconomy, attractive government policies, and increasing use of industryproducts in the healthcare and pharmaceutical sectors and other industries.Plastic and resin manufacturing continues to grow because of the increasinguse of its products by downstream manufacturers, wholesalers, andconstruction companies. Paper and metal demand has increased in the pastcouple of years for packaging and other industrial uses. The process industry,particularly chemical manufacturing, continues to face challenges in the areasof patent development and regulatory controls.

3. Steel industry trendsThe last couple of years appear to have trended stably for the global steelindustry compared to the volatility in steel and raw material prices experiencedduring the financial crisis. Consumption and utilization rates have picked up inmost major economies, with consumption surpassing its pre-crisis highs insome countries/regions. Production and consumption levels have improvedacross the globe, but excess supply has prevented steel prices from rising intandem with raw material prices. The timely support by the governments ofmajor economies through stimulus packages provided the base for the globalrecovery of the steel sector. However, volatility in global steel prices isexpected to continue because of the oversupply situation and unpredictable

demand. The graph and charts in the following figure show recent volatilityin steel prices.

Figure 1. Steel production and pricing trends


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Demand from BRIC countries (Brazil, Russia, India, and China), particularlyChina, has been a key driver in growth over the last decade. India has alsoregistered strong demand over the last five years. However, there has not beena significant increase in Indian steel production in the last few years because ofstringent mining and land allotment laws, which make the country a netimporter of steel. Brazil and Russia also recovered strongly from the economic

crisis and offer an avenue for higher steel production in the medium term.Apart from China, per capita steel consumption in the BRIC nations issignificantly below the world average; however, projected economic growth inthese countries indicate a strong demand for steel going forward.

The Indian steel industry plays a significant role in the countrys economicgrowth. Steel has a stronghold in the traditional sectors, such as infrastructureand construction, automobile manufacturing, transportation, and industrialapplications. In addition, stainless steel (a steel variant) is being used ininnovative applications because of its corrosion-resistive properties.

The country has acquired a central position on the global steel map with itsgiant steel mills, acquisition of global scale capacities, continuous modernization

and upgrading of old plants, improved energy efficiency, and backwardintegration into global raw material sources. Global steel giants from across theworld have shown interest in the industry because of its phenomenalperformance.


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4. Market drivers andareas of focus

The global steel outlook for the next two to three years is cautiously optimistic.Growth in developing economies will remain strong and continue to boost totalglobal steel demand. However, the modest recovery in more advancedeconomies is constrained by ongoing financial uncertainty. Demand for rawmaterial is increasing in line with growth in steel production, but there is aconstraint on the supply side of raw material because of the lack of adequateinfrastructure and increasingly stringent environmental laws and regulations.

Beyond China, few other countries have the steel production growth capacity ofIndia, which is why it is strategically placed to be the next landmark on theglobal steel landscape. Sufficient iron ore reserves, low per capita steelconsumption, and strong demand for steel due to strong economic growthgives India the competitive edge over other emerging economies. India hasbeen a net importer of steel since 2007, and the widening difference between

demand and supply will encourage new capacities to come on stream.

Construction and infrastructure remain key steel-consuming sectors in India.Investments in these sectors in the 2012 2017 timeframe are estimated to beapproximately US$1 trillion, and there is a corresponding increase in steeldemand. Domestic steel demand within India is expected to growapproximately 10 12 percent on an annual basis over the next few years as thelaunch of low-cost passenger cars will likely expand the market and thereforethe demand.

India is expected to become the second-largest producer by 201516. Majorcapacity expansions that are expected to be operational in the next three yearsinclude projects by JSW Steel and Steel Authority of India (SAIL). Total crude

capacity in India is expected to be approximately 112 million tons by 2015,registering a compound annual growth rate of 9 percent. The growth potentialof the steel industry in India has attracted many global steel players, with someentering into strategic partnerships with major Indian steel manufacturers asthey feel that green field projects will take longer to become profitable andestablished companies already have an existing customer base in the region.The industry should receive additional support from the Indian government,with policy changes planned for iron ore mining in the areas of competitivebidding and the transparent allocation of mineral licenses. The beneficiaries ofsuch policy changes will be both Indian organizations as well as globalstakeholders.

Besides a shortfall of coking coal, other bottlenecks to growth of the industry

include inadequate infrastructure in railways, roads, and ports. This shortcomingleads to delays in rake movement, congestion, and inventory pileup at ports.Other challenges include land acquisition delays and environmental clearances,both of which require focus for the accelerated growth of the Indian steelindustry.

Figure 2.Global steel market drivers

and areas of focus


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The Indian government needs to support this strategically important industryby increasing the exploration for raw materials and developing the enablinginfrastructure. Steel companies should increase their focus on new technologiesto increase productivity, reduce raw material costs, and expand their productfootprint. Consensus must evolve around socioeconomic and environmentalchallenges, keeping in mind the window of opportunity for growth. The

successful model of the Ultra Mega Power Projects in India can be replicated inthe steel sector through the formation of special purpose vehicles forimplementing selected green field projects. The Indian steel industry, therefore,requires structural and policy changes to achieve its strong growth potential inthe coming decade.

5. Technology as a key enabler

In a business climate of increased competitive pressure and shifting marketconditions, enterprises that thrive have defined capabilities and frameworks thatallow them to act quickly and decisively. In turn, they can accelerate change to

seize business opportunities.

The Microsoft approach to maximize the technology experience for amanufacturing enterprise is anchored on four core principles:

Driving innovation. To be successful in rapidly evolving emerging anddeveloped markets, manufacturers need to accelerate the pace of innovation,bring their products to market quicker, and protect their intellectual property(IP).

Driving operational excellence. It is imperative for manufacturers tomaximize their efficiency in manufacturing operations, supply chain, salesand marketing, and so on while minimizing their costs as they perform such

operations. Driving growth. Improving collaboration through the use of new social

technologies, exciting the new generation of workers, as well as focusing onthe unique needs of emerging markets are all important for growth.

Driving technology adoption. The use of computer tablets and handhelddevices is increasing in manufacturing in general, including processmanufacturing. We see such device proliferation in manufacturingoperations, supply chain, sales and marketing, as well as product designareas. The use of new trends in user interface, such as touch, gesture, andvoice recognition are also expected to increase in process manufacturing.

Outcomes are better managed with a holistic business approach through which

the organization takes advantage of technological advancements, includingwell-managed processes, consistent information, and predictable analytics.Enterprise architecture as a discipline provides a foundation for an organizationto align strategic objectives with opportunities for change through portfoliogap analysis, transition planning, and architectural governance.

Some of the key results include: Faster, better-informed strategic and tactical decisions with validated results Prioritized investments to support business goals Improved risk management of organizational transformation Enterprise-level communication and visibility for people, processes, and assets Standardization and governance of shared business and IT building blocks

Figure 3.Four principles to maximizethe technology experience


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6. Enterprise Architectureapproach

The process manufacturing industry and the steel industry in particular facecomplex issues such as resource constraints (including the timely availability ofnatural resources such as iron ore and coking coal), seasonal demandvariations, price fluctuations, stringent environmental laws, regulations, andmargin pressures posed by other metal and plastic industries. Also, the industryis in a state of consolidation with global players emerging from the mix.A successful steel enterprise needs to focus on a core of collaboration andreuse of technology solutions and data in the form of services that can beshared across workflows to improve agility and lower costs.

To ensure such collaboration becomes a reality, organizations need to addresstwo major roles that are especially important to achieve success: at theenterprise architecture planning level where cross-architecture and cross-

project collaboration occurs, and also at the initiative level where solutionarchitecture design of reusable assets across projects occur.

A unified planning approach with enterprise architecture as the anchor andbusiness process management (BPM), master data management (MDM), andenterprise manufacturing intelligence (EMI) provides holistic value to anenterprise.

The notion of business process optimization has been around for almost acentury and was a key component of the Industrial Revolution. Yet in the lastdecade, the focus in many process improvement communities shifted subtly toBPM. The key distinction for BPM as a discipline is added focus on flexible anddynamic process design as well as process orchestration and automation

through IT enablement. In addition to reduced cost through continued processimprovement and automation, BPM also provides the foundation for aconverged and agile business and IT responsiveness.

Figure 4. Enterprise architectureanchors an integrated business

process approach


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Identifying and mapping key business processes not only helps to have acommon vocabulary between business and IT, it also helps identify the keyenterprise data objects (entities) such as customers, contacts, products, andorders. MDM is a key function that contributes significantly to enterprisesolutions including enterprise integration, service-oriented architecture (SOA),and analytics. Master data is the base data that is used for transactions by many

systemsfor example, a product part list used by a steel manufacturer to orderfrom suppliers, stock manufacturing units, and calculate selling prices. Asuccessfully implemented MDM solution ensures that an organization does notuse multiple versions of the same reference data in different systems and partsof its operations. As such, MDM increases data quality and assurance byproviding what is sometimes called a single version of the truth. MDM alsofacilitates the exchange of data between solutions without having to do point-to-point mappings, which saves significant time and money whenimplementing major business solutions.

There is a strong need for convergence of BPM and MDM initiatives andorganizations should not treat these as disparate efforts. The ability tosynchronize an organizations master datawhether it be customer data,

product data, supplier data, or transaction dataacross applications hastremendous value when considering process optimization opportunities. MDMis the right glue between business process and analytics. It is impossible fororganizations to meet expected service levels without smarter analytics andtrusted single sources of data. MDM is also critical for addressing big datascenarios, and benefits are accentuated with a trusted single source of data.

Savvy executives know that critical success factors wont be achieved unlessthey are explicitly articulated in the goals and measures that drive anorganization. They know that having a laser focus on the essence of growthand profitability is essential. But the metrics arent the only keys to success.Manufacturers must build global views and deliver easy-to-use analytic tools toevery level of the organization to ensure the delivery of corporate success.

Such success requires an end-to-end view of critical processes from the plantlevel operator to the executives at corporate headquarters.

Production level analysis is an essential capability as manufacturers work toimprove performance to meet the needs of demand-driven supply networks.Composite applications can incorporate necessary analysis and reporting toolsso that cause-and-effect relationships can be identified at the source and poorquality production can be minimized. At a higher level, organizations mustaggregate and distill information from multiple levels of production datasources in a multi-layer EMI architecture and then synthesize real-time decisionsupport tools for numerous management roles in the organization as well.


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7. Other considerationsAs the process manufacturing industry adopts a unified technology approachanchored on enterprise architecture, other paradigms or technology evolutionscome into consideration as well. Some of these paradigms are described in thefollowing list:

Making meaningful sense of data for business value is critical in this age ofinformation explosion and proliferation because of machine-to-machine(M2M), people-to-machine (P2M), and people-to-people (P2P) paradigms.Interfaces to predictive modeling and big data solutions will provide thenecessary insights to improve business decisions.

Services and SOA approaches will help integrate distributed enterpriseseffectively. As you work to segment workloads, optimization of integrationapproaches will be a key.

So-called pay-by-the-drink models enable better penetration and usagewithout setting aside big budgets for consumers/clients. The cloud also

enables newer business paradigms that are very relevant for steelenterprises, as outlined in theseven-step prescriptive approach.

Mobility and use of game design techniques are real options because ofmass appeal and proliferation. Look to integrate complementary approachesas part of the journey.

Social computing brings the people quotient of optimizing processapproach. Acknowledging enterprise social networking approaches asrelevant and integrating them will augment the value realization immensely.

8. How Microsoft helpsMicrosoft and its industry partners provide process manufacturing companieswith integrated world-class solutions that enable business and technical peopleto conduct and optimize critical areas of their organizations. These areasinclude data collection and handling, collaborative analysis, business insight,innovation and innovation management, customer relationship management,decision making, regulatory control, and environmental and socialresponsibility.

Microsoft has pioneered reference architecture frameworks for multipleindustries such as banking (MIRA-B), upstream oil and gas operations (MURA),smart energy (SERA), discrete manufacturing (DIRA)and chemical and oilrefining (ChemRA). These reference architectures provide architecture buildingblocks and guidance to address challenges and industry trends withdevelopments and capabilities of technology. DIRA and ChemRA togetheraddress most if not all of the requirements for the process manufacturingindustry.
http://download.microsoft.com/download/1/1/F/11F32E70-778A-483D-B17E-4E29683E3A4F/The%20Cloud%20-%20Unlocking%20newer%20Enterprise%20Business%20Paradigms.pdfhttp://download.microsoft.com/download/1/1/F/11F32E70-778A-483D-B17E-4E29683E3A4F/The%20Cloud%20-%20Unlocking%20newer%20Enterprise%20Business%20Paradigms.pdfhttp://download.microsoft.com/download/1/1/F/11F32E70-778A-483D-B17E-4E29683E3A4F/The%20Cloud%20-%20Unlocking%20newer%20Enterprise%20Business%20Paradigms.pdfhttp://download.microsoft.com/download/1/1/F/11F32E70-778A-483D-B17E-4E29683E3A4F/The%20Cloud%20-%20Unlocking%20newer%20Enterprise%20Business%20Paradigms.pdfhttp://www.microsoft.com/dirahttp://www.microsoft.com/enterprise/industry/process-manufacturing/solutions/chemra.aspxhttp://www.microsoft.com/dirahttp://www.microsoft.com/dirahttp://www.microsoft.com/dirahttp://www.microsoft.com/enterprise/industry/process-manufacturing/solutions/chemra.aspxhttp://www.microsoft.com/enterprise/industry/process-manufacturing/solutions/chemra.aspxhttp://www.microsoft.com/enterprise/industry/process-manufacturing/solutions/chemra.aspxhttp://download.microsoft.com/download/1/1/F/11F32E70-778A-483D-B17E-4E29683E3A4F/The%20Cloud%20-%20Unlocking%20newer%20Enterprise%20Business%20Paradigms.pdfhttp://www.microsoft.com/dirahttp://www.microsoft.com/enterprise/industry/process-manufacturing/solutions/chemra.aspx


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The Microsoft Enterprise Strategy Program (ESP) provides the right consultativeapproach to enable integrated manufacturing operations. It focuses onbusiness impact and value by optimizing the use of technology to acceleratecustomers toward business goals. It provides a programmatic approach thatenables business transformation, advances technology thought leadership,

fosters innovation, and maximizes the value of Microsoft products and services.

Figure 5: Microsoft Industry reference architecture frameworks


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Figure 6. Microsoft Enterprise Strategy Program

Microsofts rich global ISV partner-led solution set within the processmanufacturing industry addresses many of the key business solution areaswithin a process environment: sales and service, innovation, sustainability,compliance and risk, and manufacturing operations.

Microsoft believes that no single company can meet the breadth of any givenenterprise customers needs; it has always relied on an extensive partnernetwork to bring innovative solutions to market. A 2007 Economist Intelligencesurvey of senior executives points out the benefits of global innovationnetworks in achieving greater levels of innovation, cost savings, access tospecialist skills and knowledge, faster time to market, and access to localmarkets. Microsoft provides a consistent value proposition for customers sothey can leverage and add their own distinctive know-how and capabilities.

Figure 7. Members of the Microsoft partner network


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9. ConclusionEnterprise architecture along with complementary approaches enable a value-based holistic method to integrate business strategies, processes, andoperations. Process industry enterprises should anchor technology efforts withenterprise architecture as they optimize operations and integrate synergistic in

organic growth channels.

Microsoft provides the right consultative approach along with extensive industryand partner breadth to help process manufacturing companies realize greateragility.

For more information about consulting and support solutions from Microsoft,contact your Microsoft Services representative or visitwww.microsoft.com/services.

10. References Microsoft in the Process Industry- Chemicals, Pulp & Paper, Metals

Processing - May 2012

India metal sector research SBICap securities

Microsoft Discrete Manufacturing Reference Architecture

Microsoft approach paper - The Cloud Unlocking new enterprise businessparadigms

Performance across boundaries Microsoft on adapting to a connectedworld in manufacturing

Report of the Working group on Steel Industry for the 12th five year plan

(2012-2017) Ministry of Steel, Government of India
http://www.microsoft.com/serviceshttp://www.microsoft.com/serviceshttp://www.microsoft.com/serviceshttp://www.microsoft.com/services

optimizing value in process manufacturing

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