Productivity System
Puts Accent on Success

Boasting a 30 percent improvement in productivity last year, Mexico’s Acerex is a world-class service center with a homegrown system for measuring success.

By Tim Triplett,
Editor-in-Chief

• Quick Facts
  

Gonzalo Beltran speaks enthusiastically about continuous productivity improvement, quality systems, lean manufacturing, employee empowerment—all the buzzwords of contemporary management practice one expects to hear in the United States. But those concepts have also found a home—and a champion—in Beltran and his Monterrey, Mexico, service center operation, Acerex.

Acerex was formed a decade ago as a 50-50 joint venture between Worthington Steel and Hylsamex, one of Mexico’s largest steel producers. Worthington, a major American steel processor, was looking for a way to invest in the burgeoning Mexican market, but was hesitant to tackle a greenfield project in such unfamiliar territory. Hylsa wanted to establish a service center operation, and valued Worthington’s expertise. Combining their contributions of land, steel, capital and know-how, the two companies got the distribution startup off the ground in September 1995.

Worthington has a strong record of successful joint ventures, including one with Viking Industries, a minority-owned Ohio steel processor; TWB Company, a partnership with ThyssenKrupp Stahl to produce tailor-welded blanks for the auto industry; Spartan Steel Coating, with Severstal North America, to produce light-gauge hot-dip galvanized steel; and Worthington Specialty Processing, a toll processing venture with U.S. Steel, among others.

Located about 130 miles south of the Texas state line, Acerex today is a major supplier of flat-rolled steel products on both sides of the border. The Monterrey facility houses three slitters and two cut-to-length lines, all made by Herr-Voss Stamco, and manned by a workforce of 185. In 2004, the plant processed about 450,000 metric tons of steel, producing revenues in excess of $120 million dollars. Roughly half of the product Acerex processes comes from its parent Hylsamex, while the rest is sourced from mills all over the world, says Beltran, Acerex operations manager.

The most revealing part of the Acerex tour focused on the computer screen in Beltran’s office. Like Hylsamex, Acerex uses SAP software as the platform for its management system. Using data gathered by the SAP program, Beltran’s staff developed their own methodology for tracking processing productivity to an amazingly fine degree, which they call their Enterprise Information System. “We have been working very hard in the last two years to increase the productivity of the plant,” Beltran explains.

Over the past several years, with Worthington’s guidance, Acerex has done industrial engineering-type time studies, tracking every move made by workers on the shop floor. Some of the observations led to changes in the plant layout, others to new procedures. But the real payoff came from the standard time model at the core of Beltran’s EIS system.

To develop the model, Beltran began by quantifying the “effective time,” the number of potentially productive hours in each month. From the 3,720 possible hours in a month (5 lines x 24 hours x 31 days), he subtracted Sundays, holidays, setup time, scheduled and unscheduled downtime for maintenance and repairs, material delays, etc. What is left—typically 1,800 to 1,900 hours per month—is the time that can actually be used to process metal. That begs the question: How much metal should Acerex be able to process and ship in that time?

Taking the time studies a step further, Beltran’s crew calculated a standard time model that factors in the many variables underlying each processing job, such as a coil’s weight, width, length and gauge, how fast the line can run, how many slits are required, the ID/OD dimensions of the slit mults, the number of bands needed to secure the mults, the type of packaging the customer needs, etc.

Once all the job’s characteristics are factored in, the formula determines the number of “standard minutes” any crew should need to process the steel. “With the effective time and the standard time, we can calculate the efficiency,” Beltran explains. That gives management a benchmark to gauge each crew’s performance.

Each morning, the previous day’s productivity is printed out on a chart showing the effective time, the standard time and the efficiency of each line. Displayed prominently at the bottom are the names of the day’s most productive crew members.

Crews on each line are given a goal for the month based on sales projections. The system not only gives them a financial incentive to perform, but perhaps an even more powerful motivator: bragging rights, Beltran says. “With this concept, we start to make a very healthy competition between crews.”

For such a system to succeed, workers need to buy into the accuracy and the fairness of the data. “They have to believe the information on the chart is true,” Beltran says. “They know that if they make a big effort on the line one day, they will see it reflected in the numbers the next day.”

Beltran says he knew the productivity system had become part of the company culture when he left the names of the top crew off the productivity report one day, and they all showed up in his office to protest the slight.

More than just an incentive system, data provided by Beltran’s model can help managers track productivity crew by crew. It can reveal personnel issues, exposing poor performers or perhaps good workers that simply lack the proper training.

The figures are also useful in setting pricing, because they show the “mix” of jobs processed in a given period. If tons are down, that does not necessarily indicate a problem, but rather that recent orders may have been more complicated, thus taking up more standard minutes of processing time. Prices should be based on time, not tons, Beltran notes. “You cannot sell difficult tons like the easy tons.”

Acerex credits personnel at Worthington for sharing information on their productivity measurement methods. Acerex has gained valuable insights by benchmarking their operation against Worthington’s TWB plant in Detroit.

Beltran points with pride to the nearly 30 percent increase in productivity Acerex achieved in 2004, the first full year of the productivity system. He sees even further room for improvement, such as filling the gaps in sales that create ineffective time.

“If you can’t measure it, you can’t improve it,” he asserts, speaking the language of today’s productivity-oriented manager the world over.