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IOD Product Direction Project Portfolio -Business cases- Luxemburg, 18 th Feb 2004 updated version Ma y 04. Introduction. Content. Global Project Portfolio page 3 Project Profile: Arcelor Advanced Catalogue A2C page 7 Project Profile: Expert Product Control EPC page 25

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  1. IOD Product Direction Project Portfolio-Business cases-Luxemburg, 18th Feb 2004 updated version May 04

  2. Introduction Content • Global Project Portfolio page 3 • Project Profile: Arcelor Advanced Catalogue A2C page 7 • Project Profile: Expert Product Control EPC page 25 • Project Profile: CO MET I page 47 • Project Profile: Dynamic Routing and Esidel not detailed in this document • Appendices page 60

  3. 1. Project Portfolio

  4. Project Portfolio Product Line Management main modules • IT Projects • Description • N° • Business Domain Module 1 Arcelor Advanced Catalogue Request For Quotation / Product Configuration Catalogue Management A2C + Esidel Module 2 Metallurgical Route Production Launching Specification Metallurgical Route Management Dynamic Routing Module 3 On Line Product Qualification Product Qualification on Production Line EPC Module 4 Anomalies Detection & Diagnosis Anomaly diagnosis Decision Support Tools EPC Module 5 Product Allocation & Re-allocation Product Allocation / Re-allocation COMET I Module 6 Available Products Available Products Management COMET I Module 7 On Line Measurement On-line Measurement Methodology - AQP Module 8 Knowledge Management Knowledge and Capitalisation Management Module 9 Score Boards Performance indicators Balance Score Cards Module 10 Transversal Issues Transversal topics of PLM modules

  5. Project Portfolio Planning of the main projects 2002 2003 2004 2005 A2C Step 1 Ramp Up A2C Step 2 Ramp Up EPC COMET I Dynamic Routing Apr Study Mid Feb

  6. Project Portfolio The IOD Product Direction project portfolio central IT budget is 9 221 K€ over 2003 - 2004 compared to 10 332 budgeted, breakdown by project as follows: Budget (K€; realised 2003 + budgeted 2004) • Multi-annual effort from 2003- 2004 • This budget involves local deployment costs for A2C except Sidmar detailed in page 11. • 2003 & 2004 budget breakdown highlight budget reduction efforts Budget (K€; realised 2003 in yellow and budgeted 2004, in green) See details in Appendix - Source Tixis Systems

  7. 2. Project Profile: A2C Arcelor Advanced Catalogue

  8. A2C Background Current situation The current Product Configuration is very complex and does not allow a “one face to the customer” policy • Issues Product Configuration Organisation MILLS SOL/ A SOL/ Mé SOL/ L SOL/ Mo CS CS EKO ACE SID SWB LDD GAL La Magone St. Chely • High degree of complexity: 13 technical product configuration languages, different policies, multiple practices and procedures • One face to the customer required as a first step to have one product configuration organisation and ensuring one unique standardised technical referential • Transfer of orders is time consuming and represents important risks. • Referential maintenance is time consuming and expensive. It is difficult to control profusion and to guarantee homogeneity of technical targets in the all Arcelor FCS perimeter. • Product Inquiry and feasibility analysis is time consuming (>1 week) and still very manual LS LS LS LS LS LS ESAB EPE SAM ECU Local Systems (LS) TECHNICAL DIAP. LCPS COMMERCIAL SIC Leverage SAP-SD Processes and systems • Not having a unique product catalogue increases costs (e.g. as many interfaces as systems) • Reduced automation possibilities, thus extra operating and maintenance costs required • Low efficiency for deployment of new functionality required as currently as many as systems, especially for e-initiatives SIA Customers

  9. A2C Objectives Arcelor Advanced Catalogue is defined by the following objectives • A2C Project Objectives • Phase Objectives • Arcelor FCS Objectives • Step 1: • Define Arcelor Common Referential • Design and development of A2C slave • Upload 90% of legacies order book in SAP UOES • Step 2: • 100% coverage of Arcelor FCS 30 Mt order book by A2C over defined scope • A2C from Slave to Master • " One face to Customer ": a global and central commercial relationship with the customer • Customer Service : Continuous customer service improvement in terms of quality and reactivity • Transversal steering : a transversal steering between commercial and production • Operational Efficiency : an optimised operational management • FCS common harmonised Ccial & technical referential • Prompt & flexible reply to product inquiries. Response time to a product inquiry shall be less than a minute for 95% of inquiries and less than a day for 100% • Reliable inter-plants transfers • Profusion control of Arcelor products offer to contribute to working capital reduction • Easy evaluation of cost and margin for each order or product family • E-business compliance • Increase productivity of product configuration process • Handle storage and management of a big amount of data, more than 60 000 active customer products, 60 000 technical products, 3 000 pre-specified products, 30 000 feasibility grids, 7 000 referential tables, 20 000 customer rules for 1000 customers, 500 inquiries a day to deal with FCS 30 Mt for at least 400 users

  10. A2C Scope - Overview (1/3) A2C project will implement a single product configuration system based on SAP that will support UOES deployment cost for the product part MILLS SOL/ A SOL/ Mé SOL/ L SOL/ Mo CS CS EKO ACE SID SWB LDD GAL COF FFS ESP La Magone St. Chely Local Systems (LS) LS LS LS LS LS LS ESAP EPE SAM ECU Local Systems (LS) This slide is product oriented. It does not show links to send administrative information, like shipping, delay, price, and volume. Please refer to next page to see an example for one plant. TECHNICAL LCPS DIAP. A2C COMMERCIAL SAP-SD SIA Customers

  11. A2C Scope - Overview (2/3) Publishing the catalogue Main features • Description of the technical product is sent to the plant in charge of production and NOT to the other plants. • No local product databases are necessary, nor local referentials. • Change Management is taken in charge by A2C. • Compliance with local language is ensured using a translator dedicated to the plant. • Compliant with usual SAP Leverage order entry. • Smooth transition allowed in transient step. • These features associate for publishing low metallurgical risks and low costs • Workload to define a metallurgical translator A2C -> local language is estimated to 60 man days i.e. 60 * 600 = 36 K€ / plant. (1) • (1) For Sidmar, a high level of automated integration induces a higher estimated cost of around 200 K€ which has been budgeted by OU North. Sidmar will detailed this estimated cost by mid April. • 270 man days are estimated for integration of A2C in Provost, • 50 man days include IT production preparation. • Other man days relative to improvements to do in Provost but not directly related to A2C are not considered : 100 for customer rules, 145 for an additional mapping Provost -> A2C. Inquiry Order Plant N Tonnage Delivery date SAP UOES Inquiry Protocol Reference Protocol Reference Possible plants A2C Inquiry Proximity Search Engine Common Referential Protocol Reference Plant N • A2C Customer Product • A2C Technical Target • Feasible Plants: • Plant 1 • Plant 2 • … • Plant N Protocol Reference Web Interface Translator Technical Product (local language) Metallurgical route

  12. A2C Scope - Overview (3/3) Publishing the catalogue - Zoom the transient step Inquiry Order Plant N Tonnage Delivery date SAP Leverage Usual Order registration SAP UOES Inquiry Protocol Reference Protocol Reference Possible plants A2C Inquiry Proximity Search Engine Common Referential TRANSIENT STEP Comparison of metallurgical targets between the two systems Protocol Reference Plant N • A2C Customer Product • A2C Technical Target • Feasible Plants: • Plant 1 • Plant 2 • … • Plant N Protocol Reference Translation Technical Product (local language) Web Interface Metallurgical route

  13. A2C Scope - Business Location Organisation Business Process • Industrial Operations Departments : Master Planning, Metallurgical Routes, Quality department • Metallurgical departments • FCS Commercial – General Industry MTS Manager Technical Support • FCS Commercial – Arcelor Auto MTS Manager Technical Support • FCS Commercial – Sales Agency • FCS Accountants and Cost Controllers • 1st Choice product Inquiry Configuration • 1st Choice Product Configuration • Product Publication • Metallurgical Referential Management • Internal 1st choice orders from plant to plant are part of the scope • All FCS European plants except those detailed below as out of scope • All FCS sales agencies including integrated steel service centre agencies In Scope • Order fulfilment • Customer Data Referential Management (Contract Management, Pricing, Logistics…) • Billing • Shipping • Sales forecast • Production Capacity Master Planning • Claims co-ordination and management • Any entities of Stainless Steels sector • Any entities of LCS, Long Carbon Steels sector • Any entities of DTT, Distribution Transformation Trading sector • APE business units (FCS sector) • ACB mini mill • APE plants • Any other FCS international plants (out of Europe) • All other sectors plants Out of scope

  14. Scope - IT Technology Application Data • Database to store product data (catalogue) • Referential in SAP • Product configuration and validation using proximity search engine and rules engine • Mapping to connect legacy system and commercial system with A2C • Publishing services • Metallurgical definition of product –(commercial and technical) • Technical and commercial referential for product target specifications • Complementary referential for commercial services when needed • Dimensional feasibility data • Customer and internal rules for product definition • SAP R/3 PLM (including iPPE) • EAI Webmethods • Java / Websphere / WSAD • Interpel / MQSeries • Palm OS • Unix / Windows NT • UDB / Sybase • Blaze (FairIsaac) In Scope • Pricedata • Commercial data (order,…) • Logistic data • Production data • Billing data • Technical capability • Production planning • Commercial flow • Production management system • Metallurgical routes • Routings Out of scope

  15. A2C Constraints The implementation of A2C has the following constraints Business constraints IS / IT constraints • Arcelor Order Entry System cannot be stopped. No interruption of order registration during new systems implementation and roll out • A2C shall be compliant with SAP UOES Back Office initially through the validation system to initiate UOE with product provided by legacy system (Phase 1) and with Arcelor plants’ heterogeneous local product legacies through the product configuration system to all Arcelor entities (Phase 2) • Arcelor engages its responsibility to deliver certified reliable products to its customer. A2C shall run under quality assurance to ensure product configuration reliability. As a matter of interest, an average error of product configuration equivalent to 1 out 1000 will cost twice A2C budget • Arcelor is a multinational company which means A2C shall be available in many languages • Time is a key constraint. A2C has been delivered within 2 years. As a matter of interest, LCPS was delivered in 5 years with a 3 times smaller scope. • New standards emerges like e-initiatives; A2C shall support evolution and ensure e-compliance especially regarding response time and interactivity • Non specialists shall be able to use the catalogue which implies a very user friendly interface based on today’s web sites • The catalogue must be compliant with Arcelor’s IS/IT policy : SAP R/3, EAI Webmethods and Java / Websphere, GO4IT recommandations

  16. A2C Assumptions - Benefits (1/2) Potential benefits are estimated to 10 M€ / year in regards of project objectives Should be added stakes related with strategic issues but accurate evaluations are subjective. Thus, we did not include them although they probably are the most important Stakes & Objectives Productivity Product Assurance Quality Strategic 1 Unique products and Customers referential for Arcelor FCS perimeter Decrease of referential maintenance cost (1 instead of n)0,5 people/ main plant = 5*60 KE Clear and common definition of targets Promotion of the Arcelor product offer 2 Quick and reliable transfer of order from a plant to another Decrease claims risks and cost Flexibility towards the customer in case of production incident and / or overbooking Better people efficiency: 0,2 people/ main plant = 2*60 KE Metallurgical routes robustness.Strong contribution to yields increase and second choices red. 25 Mt *0,1%*150 E/t = 3,75 ME 3 Profusion control starting from order registration Metallurgical specification cost reduction: 0,2 people/ main plant = 2 *60 KE Associated services including shorter lead-times 4 Pushed offer strategy instead of a pure “follower” strategy Margin optimisation Orientation towards robust products. Promotion of Arcelor Best of Brand products. 5 Priority given to allocation of available products Available products re-allocation ratio on prime orders: 20kt *150 = 3 M Euros. Rush orders easier management 6 Better response time to product inquiry Automatic response for 80% inquiries: 4 people: 4*60KE Commercial reactivity

  17. A2C Assumptions - Benefits (2/2) Potential benefits are estimated to 10 M€ / year in regards of project objectives Stakes related with strategic issues should be added but accurate evaluations are subjective. Thus, we did not include them although they probably are the most important Stakes & Objectives Productivity Product Assurance Quality Strategic 7 E-business & e-procurement compliance Commercial people productivity1% more of orders through e-platforms : 2,5 MEuros E-business compliant/ Inexpensive connection with e-platforms. 8 User friendliness Commercial department productivity Reliability in product choice Promotion of the Arcelor product offer 9 Easy tracking of new products ramp up Easier calculation of production costs. Order book orientation 10 Transparency of production costs in relation with commercial specifications Easier calculation of production costs. Order book orientation 11 Easy follow-up of products class (green, orange, red, purple, blue products) • Margin consolidation • Immediate control of drifts Prevention of exotic products Easy commercial follow-up of promoted products. 12 Flexible and user friendly tools dedicated to product mix orientation Productivity of tools dedicated to specifications management Commercial ReactivityMargins optimisation Increased service performance. Multi-answers to inquiries. 13 Supply Chain Connectivity - Service ability and multi-proposals Automatic detection of difficultorders (on service point of view)

  18. A2C Assumptions - IS / IT The implementation of A2C is submitted to the following assumptions Business assumptions IS / IT assumptions • Close collaboration of all entities concerned and required for the project like : • Manager Technical Support (MTS) and RTC commit to customer rules definition and validation • Manager Technical Support (MTS) and RTC commit to CTT definition • LCPS productivity increase can release resources for A2C • Strong support from decision makers to boost A2C ramp up • Arcelor Wide Area Network (WAN) and Local Area Network (LAN) can support data propagation. Every point on the Arcelor network is reachable and has enough bandwidth for A2C applications • Arcelor network and legacies have acceptable response time and reliability • A2C can be easily interfaced with other product configuration systems (LCPS, Diapason, Provost, ESAP, EPE…), and with UOES • Local product configuration systems can support A2C ramp up. • New Proximity Search Engine (PSE) module and new Arcelor feasibility grids will be ready on time • Availability of external software package component (SAP, Webmethod) in time • All new software and packages (SAP iPPE, HNC Blaze, Webmethods…) deployed to support A2C are perfectly mastered by the IS / IT team on a technical point of view and by the business team on a functional point of view

  19. A2C Reporting (1/6) The project is planned to be fully ramped up by end 2004 2002 2003 2003 2004 2005 Phase 1 Arcelor Common Referential definition Go Live Central system design and development (Slave) Deliver harmonised products from local systems (Diapason & LCPS) to UOES Phase 2 Go Live Central system design and development (Master) Deployment preparation Target Sites Deployment Interdependencies

  20. A2C Reporting (2/56) Automotive Industry deployment plan, still under validation, depends of customer team creation and Arcelor Auto priorities

  21. Business Project Manager IS / IT Project Manager Loic Goascoz François Buonomo Business Team IS / IT Team A. Weinzoepflen A. Defer JM Duflot I. Boul Development Team & Local correspondents in the plants A2C Reporting (3/6) A2C Project Organisation Business Owner A. Tivolle Steering Committee ( Every 2 months) RTC / MTS Managers A2C Project Managers Local metallurgical Managers

  22. A2C Reporting (4/6) A2C reports to the following decision instances. Project review meetings with in scope ramp up sites are detailed below : Steering Committee and Kick Off meeting • UOES Steering Committees, every month, whose main item is scheduling co-ordination • Pre-Coteco every month • Coteco, 22nd November • Business Steering Committees • Automotive Business Steering Committee every 2 months • General Industry Business Steering Committee every 2 months • On site ramp up project reviews • Sidmar : 5th August 2003, 18th October 2003, 23rd October 2003(Kris Stevens), 17th February 2004 and additional workgroups • Bremen : at least every 6 months, 11th December 2003 (Antoine Van Schooten), 24th March 2004 • Saint Chély : 10th July 2003, 17&18th September 2003 • Sollac and Cockerill-Sambre : 12th September , 26th September, 8th October and additional workgroups • La Magona : 23rd May 2003, 12-13th June 2003, 25th June 2003, 2nd October 2003 • Avilès: April 2003, 18th February 2004, 20th April 2004 • Eko-Stahl : 11th March 04, next meeting plan 14th April 04

  23. A2C Reporting (5/6) A2C dashboard and reporting tools are described below and delivered to key decision makers at the following frequency : Project tracking tools • Monthly budget report • Weekly IS / IT Flash Report (sample below) • Daily key performance indicators like product upload progress, time to answer a product feasibility inquiry, Pre-Specified Product coverage and profusion control (samples below)

  24. A2C Reporting (6/6) (source Tixis Systems) A2C budget is monthly tracked per main activities. Below the realised for 2003 (left) and the budgeted for 2004 (right) breakdown per main activities About 2 300 man days (Sidmar included) are budgeted for A2C local deployment and sites integration. More than 50% of A2C 2004 budget.

  25. Project Portfolio Software maintenance are 10% of total IT cost in 2004. They decrease up to 5% in 2007. For A2C, Fair Isaac license fee is 3% of total running costs for the next 5 years. Fair Isaac total fee (870 K Euros) is shared between A2C, EPC and COMET 1 Zoom on A2Coperating costs - 26 % - 37 % - 45 % Cost estimate per team member is evaluated to 100 K Euros a year

  26. Project Portfolio Zoom on A2Coperating costs

  27. Project Portfolio Blaze from Fair Isaac is a key system to reach projects benefits • Blaze overall cost is 870 KE which means 18 KE per CPU • Benefits to A2C, EPC and COMET 1 • Progressive implementation of Blaze will allow A2C staff reduction from 13 to 8 people. • Automated response to inquiry is a major contribution of Blaze software to commercial reactivity. • Blaze software will also be used for EPC next generation. It allows significant HR savings. The basic principles of surface inspection system (SIAS) will be used with Blaze support. • Automatic reallocation engine of COMET 1 runs with Blaze software. • 9 for A2C • 31 to 35 for EPC • 4 to 6 for Comet 1 • 1 for Optimix • 2 for Industeel • 47 to 52 CPU equivalent will be used for Blaze

  28. A2C Scoring The Arcelor Advanced Catalogue project has been scored as high priority according to the AFCS project approval criteria Compliance with the approval process Comments • Grade • Points • Deployment cost included for LCPS, CKS and plants in transient step. 200 K€ cost estimate has been added for Sidmar. • B • Project size • 6 965 K€ • H • 5 • Pay-back • Estimated stake is 10 M Euros thus less a year return on investment • Competitive advantage • Improve performance significantly on customer key buying factors such as speed and reliability of delivery and delivered quality • M/ H • 5 • Operational urgency • M/H • 4 • Direct reaction on extreme operational risk of orders transfers • Decision support • M/H • 4 • Other support for key decision makers • Overall Business priority • H • 5 • CU • Function scope • Impacts all OU within FCS except APE and ACB mini mill • WA • Technologic fit • Well aligned

  29. 2. Project Profile: Expert Product Control, EPC

  30. EPC Background (1/4) An efficient toolkit for product quality assurance, cost reduction and metallurgical knowledge sharing • Product Quality Assurance • Cost Reduction • EPC has proven capabilities to • assist metallurgical and process people to detect deviations affecting products quality issues • deliver ability to detect early on process, any drift of captors or any changes regarding process operations • deliver continuous progress by analysing gaps between models and measures • Global cost reduction estimate is 1€ / ton / year over FCS based on : • Metallurgic rules loosening • Increase of metallurgical yields Effectiveness Highlights 2003 Savings Highlights 2003 • Optimisation of Titanium addition : 960 K€ / year • Decrease of tramp elements restriction : 740 K€ / year • Decrease of annealing temperature : 3 800 K€ / year • Decrease of slab allocation restriction in DK : 245 K€ in 2003 • Decrease of tensile test in Carlam : 53K€ since Sept 03 • Decrease tensile test in SOLMED : 24K€ since Sept 03 • Implementation of temper mill models enable: • detection of coil inversion, • detection of transition slabs • Example of Mardyck incident form

  31. EPC Background (2/4) Example of detailed EPC cost reductions for steelwork over the past 3 years • Slabs qualification • Removal of analytical constraints • Bayesian networks, based on SIAS observations from coating lines, allow to foresee progress, comparing to the usual rules classification system (CQP) • Removal of constraint on the qualification (slabs are not re-allocated due to some of the process events) • Use of Bayesian network • In prospect : a direct qualification of slabs by a network. • The quantitative setting of IF routes, made through the physical modelisation, on each process, allows: • bear fitting of titanium values according to the performances in carbon achievement (C retake) • thresholds’ fitting of P, S, and N elements • fitting of Al and Mn values • removals of constraints on residual elements (lower constraints in Aceralia) • optimisation of lime addition according to the real phosphorus content • Control of carbon content by controlling the carbon pick-up • Sollac-Atlantique (benefits 2001) • Dynamic re-allocation : 3,5%4,5 Mt x 45€ *0,25 (EPC) i.e. 2,6M€. • Quality of slabs and coils measured with an improvement of 1st choice yield : 1,3M€ • Sollac-Lorraine (In progress 2002) • Decrease of H soundness capacity : 6.2k€ • Decrease of downgraded for exfoliation : 9.8k€ • Sollac Méditerranée • Deconstraint of slab qualification : 100 k€/year on A306 grades • SWB Bremen • Project to compare qualification and prediction with bayesian network (2003) • Cockerill-Sambre (2002) • Ti : 0.06€/t et pt x 15pts x 500Kt = 0.47M€/an • Sollac-Atlantique (2001 à 2003) • 2001 benefits : 2,4 M€ • Ti : 0.047€/t x 9pts x 2.5Mt = 1M€ (2003) • P + S : 2M€ • Removal of constraints on residual elements 5M€ • Linearization of lime addition scales : 400k€ • Sollac-Lorraine (2000 à 2001) • Ti : 75k€ • Al : 24.6k€ • N : 58.4k€ • SWB Bremen • Better control of the carbon pick-up

  32. Logistic Chain • Use of Bayesian networks allows a decrease of the systematic scarfing Sollac-Lorraine (2000 - 2001) : 145.6k€ EPC Background (3/4) Example of detailed EPC cost reductions for steelwork over the past 3 years • Process Constraints • Defects prediction • Use of nozzle with carbon free liner • Use or alternative to Foseco Turbostop by using Aceralia technical solution • Triangular oscillation can result in deconstraint on the casting speed keeping a constant defect rate. An hydraulic oscillator is necessary. • Measurements of total oxygen content • Generalisation of viscous mould slag for ULC steel grades. Apply the viscous mould slag as in EKO and Sollac for ULC. • Productivity : sequence length, mix of steel grades • Removal of constraints on casting speed. • The joint use of segregation and Mechanical Characteristics prediction models allows to fit the casting speed to the chemical analysis Sollac-Atlantique: valorisation in progress Sollac-Lorraine (2000 to 2001) :1.1M€ • Sollac-Méditerranée (2003) • Stakes for using same CC nozzle material as Sollac Lorraine or Atlantique : 0,3-0,4 M€/year. Possible project • Sollac Lorraine & EKO stahl (2003-2004) • Alternative to turbostop: stakes 0,5 M€/year • Sollac-Lorraine (2000 à 2001) • 1,2 M€/year if casting speed is deconstraint from 0.9 to 1.1 m/min without increasing the defect rates • SWB Bremen • Better control of the liquid steel cleanliness in the tundish. Alternative to Turbostop. • Aceralia • Save the sample + total measurements of total oxygen to qualify the heat (stakes to be evaluated) • Decrease of slivers rates (to be evaluated with the removal of systematic scarfing rule)1,1 M€ • Slabs conditioning • Remove constraint on scarfing in Aceralia where 100% of ULC slabs are scarfed Aceralia Cost for scarfing is 4€/t

  33. EPC Background (4/4) EPC industrial operations has underlined some IS / IT weaknesses • IS / IT Diagnosis • EPC is still running with a prototype version launched in 1998, some bugs of the initial prototype are still remaining • Software modularity is insufficient especially regarding split of real time (coil release and process alarms) and batch mode dedicated to metallurgical studies • EPC is not based on a multilingual approach • Not enough user friendly • Users depends from Tixis for any adjustments or fine tuning • during EPC roll out, non anticipated additional functions have brought complexity to IS / IT architecture • software coil allocation for Surface Inspection System SIAS is not integrated to EPC A fully operational system needs : 1. a more robust, reliable system with a convivial user interface 2. an architecture that splits “ real time “ operation (coil quality release, process alarms) from batch mode dedicated to metallurgical studies

  34. EPC Objectives Following the issues listed before, objectives of EPC are: • Project Objectives • Phase Objectives • Arcelor FCS Objectives • Phase 1 : Design, development and deployment of EPC V1 on 16 lines over 3 years 2000 - 2003 to demonstrate business value and payback • Phase 2 : EPC V2 definitive system • EKO delivery in June 04, full package for cold rolled lines except defect application • Bregal delivery in Sept 04, full package for cold rolled lines • Florange and Dunkerque steel plants upgrade, Nov 2004, full package for all lines • Upgrade of already equipped lines, delivery end 2004 • Preventive Product Quality Assurance • Decrease of internal and external non quality • Increase productivity of quality teams • Integrate EPC to quality release and process control applications • Ease use of EPC from any people within Arcelor (multilingual, user friendly…) • Integration of surface inspection coil allocation software • Develop a modular software to become the baseline of the Global Product Quality System • Guarantee low claims level by delivering reliable products • Reduce production costs without impairing quality issues • Increase industrial ramping up of new products Subject of this BOSCAR Subject of this BOSCAR

  35. EPC Scope - Business (1/3) Location Organisation Business Process • Metallurgical business knowledge management shared services • Online models of products properties and associated critical process parameters • Follow up of gap between models and measurement • FCS production lines team • FCS Local Metallurgical Quality teams • FCS RTC or MTS (Manager Technical Support) • All people from Arcelor can access results through the web and use them if appropriate for their own purposes • Please refer to next slide • Stainless Steels sector plants would be included in scope In Scope • Process Control SPC (Statistical Process Control) • Any other plants from Long Carbon steels or DTT Out of scope

  36. EPC Scope - Business (2/3) Zoom on the 16 lines already equipped as of now, 5 lines (in red) to be equipped in 2004, 3 lines (in green) in 2005, 6 lines still to plan (in blue) • Centre • Wallonie • North • South • Brazil • API • HDGL • MTT2, MTT3 • GALMA, Florange • Desvres • Galma 2 • EUROGAL • BREGAL • EKO VZA2 • Sidgal 3 • SOLMED • AVILES • VEGA • CAPL and Batch annealing • Florange • Kessales CAPL and Batch annealing • Bremen • Sidmed Batch annealing • HSM • Dunkerque • CARLAM • Bremen • Sidmar • Fos • Steel plants • Dunkerque • Florange • Bremen • Tinning line • Basse Indre • Line 1 &2 • Discontinuous • temper mill • Florange • Mardyck • Basse Indre At least 6 new lines shall be equipped for Automotive Product Quality Assurance. Equipment of discontinuous temper mill is under study (project zero anti confusion).

  37. EPC Scope - Business (3/3) BREGAL  AFCS lines equipped with EPC (12)  API lines equipped EPC ( 4)  5 new lines to be equipped in 2004 EUROGAL CARLAM  Bremen DKACIDKTCCMKGALMA EKOVZA2     •  MKETAM FLCC2FLGALVAFLRCM Type of equipped lines : Steel plant Hot rolling mill Galvanisation line Continus annealing Skin-pass Tining line       MTGA2MTGA3 BISKPBIETAM FLSK482   Basse Indre    FOTAC SOLMED VEGA 

  38. EPC Scope - IT Technology Application Data • On line product characteristics and product diagnosis • Database to store incoming data and calculated data • Model knowledge base system • Statistical process control : following between the measures and the model results • Treatment pipe editor (Process Editor) • Target and production & process data • Validity indicator • Measures on the product • Surface defaults • Model calculated data • Java / Websphere / WSAD • MQ Series • Network belief (Hugin) • Windows NT • UDB DB2 In Scope • Customer data • Coil grading surface inspection system • Dunkerque Hot Strip Mill product qualification system (SPQR) Out of scope

  39. EPC Constraints The implementation of EPC has the following constraints Business constraints IS / IT constraints • EPC shall be deployed over 6 new lines in 2004 • EPC models shall run under quality assurance • Arcelor is a multinational company which means EPC shall be available in many languages • Non specialists shall be able to use EPC which implies a very user friendly interface based on today’s web sites • EPC must be compliant with Arcelor’s IS / IT policy • Availability of local products and processing data

  40. EPC Assumptions (1/5) EPC deployment would lead to the following benefits • Business efficiency (cost) benefits • Business effectiveness (value) benefits • IT benefits • Standard EPC business benefits. As a matter of interest, business cost reduction are estimated to 1 Euro / ton / year. • Compliance with following initiative like GPQS • Durability of quality supervision systems and of product quality assurance • Increased autonomy of production lines in terms of maintenance, studies and release beta trials • Additional use of EPC thanks to 24/7 system availability • User friendly • Decrease of maintenance costs from 3200 Euros / months / lines to 1650 in 2005 which means for 21 lines, a yearly benefit of 391 K€ from 2005 • Decrease of deployment cost of 12% which implies potential benefits of around 65 K€ in 2004 and 117 K€ estimate for 9 lines in 2005

  41. EPC Assumptions (2/5) Overview of expected deployment cost evolution, breakdown per activity Actual cost Cost evolution with EPC NG Deployment Deployment activities of Central team* and local team** 80 K€/ line* + 32 K€/ line** 69 K€/ line* + 30 K€/ line** -12% MCO Maintaining in Operational Condition 38,4 K€/year/line 19,8 K€/year/line - 48% Dev / Tests / Studies environment Software licences & servers needed for developments, tests, studies 11,8 K€/year/line 7 K€/year/line - 40% Local server On line server, Software licences (OS, BD, RT) & Services Depends on Local provider

  42. EPC Assumptions (3/5) Details of expected deployment cost evolution, breakdown per activity Central deployment costs Maintaining in Operational Condition 24 K€/year/line 69 K€/ line* + 30 K€/ line** € / line / month Fixed Price (€) -12 % -48 % 4000 4000 3200 3200 2800 92000 80000 1650* 1650* 69000 2000 2001 2002 2003 2004 2005 2006 Input data • Plan of progress carried out during 2003, maintenance is reduced by 12,5% for the year 2004 through : • Re organisation of the team • Transfer of competence • reduction in the number of versions • instruction of procedure for test and diagnosis • introduction of tools for analysis (application, network) > 300 <150 300 >>150 Share environment for Test, Studies, Simulation and Know How Data Base € / line / month 7 K€/year/line 1268 984 - 40 % 580* * on the assumption to have EPC NG ( -14,2% on the MCO) and with all planned lines equipped by end 2004 2000 - 2001 2005 - 2001-2004

  43. EPC Assumptions (4/5) Example of cost reduction and pay back experience in Carlam Profits (€) Euros Saving more 50 K€ in less than 6 months 60000 50000 40000 Monthly 30000 Cumulated 18 K€ Low production In December 20000 11 K€ 9 K€ 10000 5 K€ jul-03 aug-03 sept-03 oct-03 nov-03 dec-03 This indicator is built to identify all the samples envisaged and not carried out due to EPC .

  44. EPC Assumptions (5/5) The implementation of a EPC is submitted to the following assumptions Assumptions • Production lines request EPC deployment (Agreements in principle for line planned in 2004) • Strong support of key decision makers to boost EPC deployment over the remaining non equipped lines dedicated to automotive products

  45. EPC Reporting (1/5) The project is planned to be fully implemented by end 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Design and development of EPC V2 for mechanical properties Development of EPC V2 for defect surface Development of steel plants specifics Bregal upgrade EKO VZA2 Steel Plants upgrade This planning was established for a kick-off decision expected mid Feb. To postpone decision making systematically postpone development and deployment. Other plants upgrade Basse Indre Temper mill Deployment of other lines (Basse Indre Tinning line 2, Avilès HDGL, Vega HDGL, Bremen HSM) Interdependencies

  46. EPC Reporting (3/5) EPC Project Organisation Business Owner A. Tivolle EPC Steering Committee ( Every 2 months) Business Owner Project Managers Local metallurgical Managers Business Project IS / IT Project Manager Manager S. Ségalini Tixis/CCSF G. Pasquet IS / IT Team Business Team B.Belouin X.Marc D. Blanchard A.Djemo Alexandre Durier JM Rabiol Local correspondents in the plants K. Nontanakorn R. Sommavilla

  47. EPC Reporting (4/5) EPC Project Methodology (a CCSF standard) Client : Business Units Client : Arcelor IOD Deployment Site 1 AFCS Project Deployment Site 2 Maintenance Activities Deployment Site 3 Deployment Site N • Specification / Architecture • Conception • Development • Validation • => Models & System • Connection with local IS/IT systems Process & Product Management • Training • Tests & Validation • Plant integration • Central Team responsibility : • Corrective Maintenance • Maintenance for upgrade • Full compatible insurance

  48. EPC Reporting (5/5) EPC reporting toolkit includes : Dashboard • Work progress against planning presented by project managers • Local savings presented by local metallurgical managers

  49. EPC Scoring The Expert Product Control upgrade project has been scored as medium - high priority according to the AFCS project approval criteria Compliance with the AFCS approval process Comments • Grade • Points • 898 K€ • M • Project size • EPC upgrade cost 898 K€, between 501 and 1000 K€ including local upgrade costs. New deployment cost are not included, nor their benefits. • M/H • 3 • Pay-back • EPC upgrade pay back on a IS/IT point of view is around 1,5 year. New deployment business benefits are not included in the pay back. • Competitive advantage • Improve performance significantly on customer key business factors for strategic segments • H • 4 • Operational urgency • M • 2 • Reduce weak points on current operations • Decision support • M • 1 • High impact for other management • Overall Business priority • M / H • 4 • CU • Function scope • Impacts all OU within FCS • WA • Technologic fit • Well aligned

  50. 3. Project Profile: CO MET I

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