Can Information Systems Save U.S. Steel؟

Supply chain , Supply chain management , Inventory

Case Study–Can Information Systems Save U.S. Steel؟

In capacity U.S. Steel (USS) is the 10th largest integrated steel manufacturer in the world and the largest in the United States. Headquartered in Pittsburgh, Pennsylvania, it can produce about 14 million tons annually. The world’s largest steel maker, Europe’s Arcelor, produces more than 40 million tons annually, while South Korea’s POSCO, the second largest, produces about 30 million tons. In fiscal 2001 USS’s total revenue was $6.38 billion, with a net loss of $218 million. Its information technology budget was about 1.1 percent or $70 million, a very low number for that industry. Its third largest customer is the Ford Motor Company, an automobile manufacturer that requires an immense amount of steel.

In 1996, Ford viewed USS as the worst in performance amongst its leading suppliers, and it threatened to turn elsewhere for its steel supplies despite their 70-year relationship. “We were in danger of losing Ford’s business,” explained Gene Trudell, USS’s Cheif Information Officer. “It was that serious.” Ford’s biggest complaint, among many, was that it was not notified when its steel shipments would arrive, leaving Ford unable to operate efficiently. To USS, Ford’s threat was a wakeup call causing it to examine its whole production cycle. USS identified a number of challenges beyond its notification system. It knew it needed to lower production costs, including its cost per ton of steel and the number of hours per person required to produce a ton, as well as the costly size of its steel inventory. It had to return to profitability, and to accomplish that it needed to increase its share of the high-end steel market. Internally it needed to centralize management of the various USS businesses and factories and their information technology infrastructures, which in 1996 were locally controlled.

USS’s major problems were reflected in its order-taking process. Orders were often manual, very imprecise, and...
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