BS/020416/SH-WZ(2000)CONFIDENTIALEnhanceCapacityStability&Utilization,ProductQualityandAccuracy&TimelyDeliveryPerformancethroughLeanTransformationThisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.April24,2002LeanManufacturingDiagnosticPhaseProgressReviewBS/020416/SH-WZ(2000)2EXECUTIVESUMMARYBaoSteelcurrentlyfacessignificantchallengesinsatisfyinggrowing,demandinganddifferentiatedcustomerneedsinabidtobecomeworld-classsteelcompany.Asthekeybottleneckpartoftheproductionchain,currentHRCperformanceonassetproductivity,productqualityanddeliveryperformanceneedstobesignificantlyimprovedforBaoSteeltosecureandstrengthenitscompetitivepositiontogrowmarketshareinanincreasinglycompetitiveenvironment.Topdownbenchmarkingwithexternalandhistoricalinternalbestpracticesaswellasbottomuprootcauseanalysisrevealssignificantreductionpotentialinmaintenancetime,rollchangetime,breakdown,speedloss,rework(includingdowngrade),anddeliveryleadtime.Potentialnearterm(withinnext2years)financialimpactacrossallthreeareascouldreachRMB340millionintotal.BaoSteelshouldrealizesignificantimprovementpotentialandresultingfinancialbenefitswithinandacrossassetproductivity,productqualityanddeliverythroughacomprehensive3-5yearschangeprogram.Itshouldengageandempoweremployeesatoperationalleveltorigorouslyapplyleantoolsandstructuredproblemsolvingapproachtosetupsystemsandparticipativeprocessestopursue“Kaizen”.Tosupportleantransformation,BaoSteelshouldalsostrengthenitsorganizationalcapabilitybysettingupContinuousImprovementOrganizationaswellaspolicydeploymentsystemtoinstitutionalizethechangeprogram.ITsupportinselectedhighpriorityareashouldalsobedevelopedtosupportchanges.HRCshouldkickstartthechangeprogrambyimplementinga6monthspilotprogramimmediately.Itshouldpursuebreakthroughinitiativestoimproverollchangetime,maintenancetimeusingleantoolsaswellassettingupappropriateorganization,systemsandprocessesforcontinuousimprovementbysolvingaselectednumberofhighpriorityproductqualityandbreakdownproblems.ItshouldstartpolicydeploymentinparalleltoinstitutionalizethechangeprogramwithinHRC.ITsupportshouldalsobebuilttosupportimplementation.BS/020416/SH-WZ(2000)3TABLEOFCONTENTI.Challenges&OpportunitiesII.LeanManufacturingDiagnosticResultsIII.VisionforLeanTransformationIV.PilotPlanV.AppendixBS/020416/SH-WZ(2000)4BaoSteelispressuredtoincreasethecapacityutilizationofitsHRC,currentlythekeyandbottleneckpartofBaosteel’sproductionprocessistomeetgrowingdemandbothdomesticallyandinternationallySource:Baosteel,TeamAnalysis,McKinseysteelexpertsinterviewsBAOSTEELNEEDTOQUICKLYENHANCECAPACITYUTILIZATIONTOMAINTAINANDGROWMARKETSHAREHRC2001capacityutilization%57.761.377.474.6OEEcapacityutilization158020502001Production3.256millionton5.056milliontonCapacityutilizationbestpracticeOEEbestpractice80-85%70-75%BS/020416/SH-WZ(2000)51.62.01.31.25.88.7BAOSTEELNEEDTOCONTINUOUSLYIMPROVEPRODUCTQUALITYTOMEETEVERDEMANDINGCUSTOMERREQUIREMENTBaoSteelhasbeencontinuouslyenhancingcapabilitytomeeteverdemandingcustomerrequirements…Source:Baosteel…there’ssomegapvs.everdemandingcustomerrequirementsonqualityandhistoricalbestlevel.ReworkRate%8.79.61580205...
