The situation (2000 to 2004)
Rocky Mountain Steel Mills in Pueblo, Colorado makes specialty rod, specialty rail, bar, wire and seamless tubing. Roughly 1,100 people on site, in a plant that had been making steel since the nineteenth century, which is both the asset and the problem. A plant with that much history has methods that work because they have always worked, and nobody left who can say why.
New capital investment had failed to reach the reliability, and therefore the production levels, needed to make it profitable. Inside the company the shortfall was attributed to the equipment vendor.
Rob Simon arrived as Vice President and General Manager in September 2000 and engaged Pilot Advisors. He would go on to engage the firm at three more companies.
What we did
- Ran the root cause analysis, and did not find the vendor. The causes were internal to the company. Reliable production improved 25 percent within one month of that finding, with no new capital, and a plan was set to bring the process to within 95 percent of its maximum physical capacity. That is the opening move and it is the one most companies never make. An organization that has decided the problem is the vendor has stopped looking, which is comfortable and expensive. Everything that follows depended on a leadership team willing to hear a different answer about its own plant.
- Built the operational and financial model the planning ran on. Capacity, cost and demand integrated into one model that identified the most profitable operating points, and a sales and operations planning process aligned around optimal production strategies rather than around last year plus a percentage. Gains showed up in yield and in EBITDA. This is where the method was born. The same modeling approach later became Profit Hawk™, was carried by Simon into Steel Dynamics, and was published in Iron & Steel Technology in 2015. Pueblo is the origin of the optimization work that every later engagement on this site rests on.
- Worked the union relationship as an operating relationship, and coached the leadership team to do the same. A mill with a represented workforce has two channels running through it, and most operating leaders treat the second one as a legal matter to be handled rather than a channel to be used. The work here ran the other way. Leaders were coached to deal with the union directly, early, and on the operating facts, so that production problems were worked as production problems instead of arriving later as grievances. That is a capability rather than an event. A plant where the leadership team and the union representatives can put the same numbers on the same table and argue about what to do with them can change its schedule, its manning and its maintenance plan inside a week. A plant where they cannot needs a month and a lawyer, and the market does not wait for either.
- Then stayed for four years, and used the time to build four things the plant did not have.
- Vision and values, developed with the leadership group rather than issued to it, and carried into executive, management and supervisory workshops on living them. A values statement nobody has argued about is decoration. One a supervisor has worked through in a room with his peers is a decision rule he can use at two in the morning when the shift is short and the caster is behind.
- Personality profiling, teamwork and trust work, taken through the entire team across all four operations in the United States and Canada, weighted to whichever site had the hot spot at the time rather than delivered on a uniform schedule. In a plant where the same fifteen people have to reach agreement under time pressure every week, knowing how each of them actually decides is not a soft skill. It is throughput. Most of the delay in an operating meeting is not disagreement about the facts. Delivering it across four plants in two countries did something a single-site program cannot. It gave leaders at Portland, Pueblo, Camrose and Napa a shared way of reading each other, which is what allows a company to move work, people and priorities between sites without a month of negotiation first.
- Root cause analysis taught to the reliability, quality and safety organizations, and a corrective action program built to carry what it found. Teaching people to find causes without giving them a program that closes them produces a better informed version of the same failure. Both halves were delivered here, which is why the rejects moved and stayed moved.
- Strategic plans, and the system to run them, built on a balanced scorecard so the plan showed up in what people were measured on rather than in a binder. A plan that does not change anyone's weekly numbers is a forecast.
The mechanism
Why it worked
Blaming the equipment is the most natural thing an operating organization does, because it is the only explanation that requires nobody in the building to change. It is also testable, and the test is a root cause analysis run by somebody with no stake in the answer. That is the most valuable thing an outside operator brings, and it is why the first month produced a 25 percent gain in reliable production without a dollar of new capital.
- What happened over the next four years is the harder part and the reason the number held. Production and quality usually trade against each other in a plant like this one, and most improvement programs quietly pick a side. Push production and rejects climb. Chase quality and the mill slows. Getting 25 percent more production and 30 percent better quality out of the same asset base over the same four years means the plant stopped trading them, which only happens when the gains come from process control and from better decisions rather than from effort. Effort-based gains reverse the moment attention moves. A plant that knows which process variables drive its rejects, controls them, and plans its mix against a model of what the assets and the market will actually do, keeps the gain whether anyone is watching or not.
- The last reason it held is that the work was periodic across four years rather than a single engagement. Training delivered once is information. Training delivered repeatedly into a working operation, against the problems that operation is having that month, becomes capability.
The result
Reliable production up 25 percent within one month of the root cause finding.
Production improvements of 25 percent and quality improvements of 30 percent over four years, and a record 1,000,000 tons of prime steel in 2004, used in specialty rod and specialty rail products.
“I have engaged dozens of advisory and consulting firms to assist us in improvement efforts, and have seen dozens more in my 35 years in steel. I believe that Pilot Advisors provides the most effective and comprehensive services that we have ever received. They are worth every dollar I pay them.”
That reference is signed by the line manager who ran melting and casting, not by a corporate sponsor. Line managers are the hardest audience in a plant and the least likely to write a letter like that.
What they owned afterward
The mill kept the method, and so did the man who brought it in. Rob Simon took the same approach to Steel Dynamics, where it produced the recovery documented in the next case study on this site, and then to Evraz North America and to JSW Steel USA, where he is Chief Executive Officer. Four more engagements across two decades, all of them downstream of what was built in Pueblo.