ConfidentialMemorandumto:Mr.ZhaoZhouli,VicePresidentMr.LiQingyu,ESIDirectorImprovingProductQualityandDeliveryPerformanceatBaoshanIron&SteelCo.Ltd.BaoshanIron&SteelCo.Ltd.IthasbeenagreatpleasuretodiscusswithyouandyourcolleaguestheleanoperationsopportunitiesatBaoshanIron&Steel(Baosteel)duringthepastfewweeks;andtovisityourplantlastyearinDecember.Basedonourlatestdiscussionswehaverefinedourproposeddiagnosticapproachtoaddressyourconcernsandtoprovidethemosttailoredsolutiontoyourneeds.Thetailoringreflectsyourconcernsriseninourlastdiscussionsinthreeareas:1.EnsureproperpositioningoftheleanmanufacturingdiagnosticandpotentiallyfollowingpilotrelativetoyourowninternalESIprojectyouhavestartedalreadylastyear.2.Limitpotentialconflictsandoverlapsbetweenthedifferentprojectsandensuremaximumcoordination.3.Specialfocusofourdiagnosticworkisinidentifyingvariabilitylossesincustomerdeliveriesvs.plan,processstability(capacitylosses)andproductquality,anduseof6Sigmatoolstoaddressthem.Asagreedduringourlastmeeting,thismemooutlineshowMcKinseycouldhelpBaosteeltoachieveitsaspirationsonimprovingdeliveryperformance,higherprocessstability(assetutilization)andproductqualitybyimplementingleanmanufacturingtoolsandsystemsinthe2hotrolledcoillines,asrepresentativepilotlineswithcriticalpositionfortheentireproductionprocess.Whilewewereaskedtoproposefortheleandiagnosticonly,wehavealsodescribedthewholeprojecttogiveyouacompleteviewontheeffort.WeareextremelyexcitedtohavethisopportunitytoworkwithBaosteelinthismostimportanteffortandwelookforwardtoafruitfullong-termcooperation.Ourproposalisorganizedintothefollowingfivesections:I.BackgroundandissuestobeaddressedII.ProjectdeliverablesIII.DiagnosticapproachIV.WorkingarrangementsV.McKinseyqualificationsI.BACKGROUNDANDISSUESTOBEADDRESSEDBaosteelistheleadingautomotivesteelsupplierinChinaalreadyservingmostbigautomotiveOEM’slikeShanghaiVolkswagen.Baosteelhasexcellentmanufacturingassetsofthehighestinternationalstandard,relativelylowcostandwell-organizedplants,whichprovidesasolidbasetofurtherstrengthenitsleadershippositioninChina(e.g.,atShanghaiGM),expandtoAsiaandtherestoftheworld,andeventuallytobecomeaglobalsupplierofchoiceforglobalOEMs.However,therearestillsignificantchallengesBaosteelneedstoovercometoachieveitsaspiration:¶ImproveproductqualitytomatchinternationalqualitystandardsofleadingautomotiveOEMsforexternalbodysheets.Baosteelhasexcellentassetsincoldandhotrolledcoil,andgalvanizing.However,Baosteelneedstoimproveitsoperatingskillsofitsequipment,andupgradeitsqualitymanagementsystemsandprocessestoproducethehighqualityproductsitsequipmentiscapabableto.¶Improvedeliveryperformance(e.g.reducelead-timeandimproveon-timedelivery)tosatisfytheneedsofthehighlydemanding(international)customers.Customersglobally,andinChina,demandshortandreliabledeliverytimes.However,Baosteelcurrentdeliverytimesarerelativelylongandunreliable.Baosteelcan’tcurrentlyproducereliablyagainstproductionplansbasedoncustomerorders.Baosteelneedstostabilizeandoptimizetheoperationsofitsequipment(e.g.,hotrolledcoillines)andreviseitsproductionschedulingsystemforthewholeinternalchaintoprovidetheaspireddeliveryperformance.¶Improveprocessstabilitytoimproveassetproductivitytosecurelowcostpositionandmaximizemargins.Currentlyhotrolledcoillinedoesnotappeartoruntoitsfullpotentialcapacityduetoprocessvariability.Stabilizingand...
