To:BaosteelLeanOperationSteeringCommitteeFrom:McKinseyProjectLeadershipBecometheBestandMostCompetitiveSteelCompanyintheWorldThroughLeanTransformationTheHRMleanpilotinthefirst3monthshasachieveditsoverallplannedobjectivesundertheleadershipofsteeringcommitteeandHRMmanagement.It’sajointeffortamongpilotteams,otherparticipatingfunctionaldepartmentsandfrontlineoperators.BasedonthesuccessofHRMpilot,Baosteelshouldcommittoinstitutionalize/rolloutleanoperationtopursueCItocaptureevenlargerimpactcompanywide.Thismemoisintendedto1)summarizeachievementsofarandexpectedimpactin4thquarter,2)presentmoreopportunities/businesscasesforrolloutstartingnextyearand3)suggestarolloutapproachintermsofscope,organizationandcapabilitybuilding.Welookforwardtodiscussingwithyouontherolloutprogramandworkingwithyoutodevelopadetailedrolloutplanfornextyearinnext4–6weeks.Wethinkyoushoulddeveloparolloutplanassoonaspossiblebecauserolloutpreparationwouldrequireresourceandtimein4thquarter.1)GreatprogressofleanpilottodateatHRMandmoreimpactexpectedin4thquarterInthefirstthreemonths,theHRMleanmanufacturingpilothasalreadyprovidedsignificantbenefitsinroll-change,maintenanceandquality.ValueofthecurrentimprovementsisaboutRMB140millionperannum.Inadditiontofinancialimpact,pilothasalsobuiltcapabilities(Exhibit1:e.g.,leantools,projectmanagement,structuredproblemsolving)throughtrainingandpracticetoenablecontinuousimprovementatHRM.WeexpectpilotgenerateadditionalannualizedimpactofRMBXXXmillioninthroughimprovementeffortsin4thquarter.¶Bothrollinglineshaveachievedandstabilizedaround11mininworkrollchangeand4.5hoursinmajorbackuprollchange.ThevalueoftheimprovementisRMB120millionperyear.Furthermore,thereisadditionalimprovementpotentialofworkrollchange(e.g.,downto10minin2003)andbackuprollchange.HRMshouldstabilizeresultin4thquarterbyensuringimplementationadherencetoSOPandreducingvariation.Bystabilizingresultsin4thquarter,giventhecurrentmarketcondition,BaosteelcouldrealizeRMBmillionincrementalprofit.¶Inqualityimprovement,1580widthand1580ridgehaveinlast9and5weeksrespectivelyachievedandexceededpilottargets.ScaleteamhasnotyetachieveditstargetsandpilotteamhasalreadyidentifiedsomeofthekeyrootcausesandwilltakecountermeasuresinOctober.ThevalueofcurrentimprovementssofarisRMB6millionperyear.Stabilizingresultsin4thquarter,BaosteelcouldrealizeRMBmillionincrementalprofit.However,wethinktheimpactismuchmorebecauseprocessstabilityandproductqualityisthekeycomponentofBaosteel’scompetitivenessandprerequisiteformarketshareincreaseinmoredemandingcustomersegmentsuchasautomobilesteel.Goingforward,HRMshouldmakeextraefforttostabilizeachievedresultsbycontinuouslycheckingandensuringprocessstability,capabilityandstrictconformancetoSOP.Additional3subteamswillstartinOctobertosolve3morekeyqualityproblemsatHRM.WeexpecttoseeannualizedimpactofRMBmillionifpilotteamcouldreachtargetssetforthese3problems.¶Newmaintenanceplanningandschedulingprocesshasbeenestablished.Newleantools,suchasSMEDandvisualmanagement,havebeentrainedtothecoreteamtoincreasetheefficiencyofthemaintenance.Asaresult,thescheduleadherencehasalreadyimprovedandthemaintenancetimeshavebeenreduced.ValueofthecurrentimprovementsisRMB17millionperannum.WebelievethereisstillsignificantpotentiallefttoberealizedifHRMsticktothebestpracticestocontinuouslyeliminatewasteandgetcontractors’fullcooperationbybetteralignin...
