Agenda Introduction of TŘINECKÉ ŽELEZÁRNY, a. s. Objective of TŘINECKÉ ŽELEZÁRNY, a. s. Methods Applied Results Achieved Conclusion 2

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1 The Effects of the Main Changes of the Control System in TŘINECKÉ ŽELEZÁRNY, a.s. Ing. Jiří Cienciala, CSc. Chairman of BoD and CEO

2 Agenda Introduction of TŘINECKÉ ŽELEZÁRNY, a. s. Objective of TŘINECKÉ ŽELEZÁRNY, a. s. Methods Applied Results Achieved Conclusion 2

3 History TŽ established by the Court of Habsburg s Railway Košice - Bohumín built Centralization of steelworks at Třinec Mining and Metallurgical Company 1st electrification of rolling mill Biggest BF in Czechoslovakia World War II - confiscated Nationalized BOF Joint stock company Privatisation fully complete 3

4 Technological flows finalization coke plant ladle metallurgy billet CCM medium section drawing and surface finish RH reversing mill light section BF BOF LF Ar IR-UT bloom CCM blooming mill wire rod mill peeling and grinding billet mill Kladno heat treatment sinter plant EAF ingot teeming strip mill Bohumín 4 tube mill Ostrava-Vítkovice production of chains

5 TŽ Subsidiaries and Affiliate Companies ENERGETIKA TŘINEC energy production STROJÍRNY TŘINEC machinery SLÉVÁRNY TŘINEC foundries FERROMORAVIA steel drawing VVT tube mill Vesuvius ČR refractories Refrasil refractories Řetězárna chains TŽSCHV Kladno rolling of SBQ 5

6 Products rails wire rod SBQ bars semis rebars wide steel 6 sections

7 Motto: Quality Through the Ages Our Vision: Our Mission Together for the generations to come Advanced industrial company based on steelmaking tradition Strategic Objectives till 2011 Objectives for Years Projects within Key Areas: Partnership Technology Staff Management Attitudes & Principles: Our Groundwork: Client orientation Innovation Business spirit Flexibility Continuous improvement Teamwork Alliance thinking Consistency, observance Sharing knowledge and experience Communication Common responsibility Development of trust staff s abilities company and region linked tradition - since 1839 trade mark 7

8 Objective of TŘINECKÉ ŽELEZÁRNY, a. s. To apply and develop the systemic approach to integrated management in the long term that is aimed at: strengthening the competitive advantage increasing the value of the company attracting and recruiting young, powerful, and talented people To achieve the highest quality of internal environment by realising the synergy of internal sources as: corporate culture development of intelectual capital team work strategic management together with implementing of process and project management 8

9 TŽ Highlights Indicator Unit Steel production kt Sales of products kt Revenues mil. CZK Profit mil. CZK ROS % ROCE % Employees people Steel per employee tons

10 Methods Applied Strategic Goals and Fulfilment in Key Areas of Partnership, Technology, Staff, Management

11 Strategic Goals and Fulfilment Partnership Customer-oriented company (partnership, just intime, innovation), optimal externalisation of nonproductive processes, more efficient management of subsidiaries External sources production chains acquisitions, new production capacities in TŽ => leading to product portfolio diversification => resulting in strengthening the company s resistance to fluctuations in different market segments External sources (using various grants) utilization for TŽ s development to the largest possible extent 11

12 Strategic Goals and Fulfilment Technology Permanent process improvement exploitation of internal sources: productivity growth (new investments, innovation, downsizing), quality, ecology-friendly production Significant investments nd stage of wire rod mill modernization 2003 Modernization of continuous light section mill 2004 Exchange of the converter vessels, new ladle furnace 2005 Major overhaul of the blast furnace #4, exchange of the converter vessels 12

13 Strategic Goals and Fulfilment Technology Significant Investments 2006 RH Vacuum Degassing Station #2 Dedusting of Sinter Plant #1 STC Annealing furnace #3 Reconstruction of the CCM #1 2 strands fi 525 mm Significant Planned Investments 2007 Garret coiling machines Secondary de-dusting of the BOF Plant Desulfurization of the hot metal Bars finishing line 13

14 Strategic Goals and Fulfilment Staff Well-educated, well-trained, well-motivated, purposeful, steadfast and resolved person = the driving force of progress, developing intellectual capital Recruitment of young perspective experts program of cooperation with all types of schools Compact program of staff training Improving working and living conditions, systematic decreasing accident rate level joining the IISI s Accident-Free Steel program 14

15 Strategic Goals and Fulfilment Management Setting TŽ s strategy and specifying tools for its implementation (strategic framework, project management) Crisis management in TŽ in 1999 (savings of CZK 1.2 billion, company s consolidation appropriate preparation for the periods to come) Strategic Management (Business Plan, Financial Plan, BSC, Project Management, Key Production Programs etc.) 15

16 Results Achieved In Key Areas of Partnership, Technology, Staff, Management

17 Customer-oriented Company Corporate development Cooperation on quality Cooperation on investment activities Partnership Technology suppliers Siemens Autel SMS Meer Concast TŽ Customers ESAB electrodes MUBEA springs ŽDB wire Moravské forges Example: Cooperation with research institutions, universities, companies Vesuvius, Refrasil 17

18 Measuring of Customer Satisfaction Partnership The total index of employees satisfaction is calculated as a simple arithmetic average of particular indexes Is, Iv and Id Ic = 4.15 points and exceeded planned value 4.06 point 2006 evaluation is still in progress Index Satisfaction with service Index Satisfaction with product Index Satisfaction with deliveries Total Index The level of customer satisfation (%) Satisfaction with product (%)

19 Trends of the Steel Grades Produced Technology 19

20 Change of the Product Portfolio (%) Technology 20

21 Air Pollution (t/year) Technology 21

22 Number of Accidents Staff 22

23 Results of Satisfaction Measuring Indicator Total salary Company perspective Staff Knowlegde of companies objectives Confidence in the manager Perspective for employees Total satisfaction level The total satisfaction level is measured with the Index of extensity which can reach the value from +1 up to 1.

24 Development of Parameters BSC Method V O P Start-up curve of new investments Claims Management F R T R V R P S Start-up curve of new investments Claims according to mills Accident rate Ratio of skilled employees Labor turnover S T M Accident rate Ratio of skilled employees Labor turnover Material utilization Charge richness Production cost Stock level - charge T O P P S Market share CR, EU, CEFTA Contentment of the customers Labor productivity Ratio of skilled employees Labor turnover T M Material utilization according to mills Production capacity utilization Production cost Stock level T Production of rolled material Total cost of hot pig iron Total cost of hot steel 24 M Pretax profit Pretax profit of subsidiaries

25 Projects in Key Area Management Management Completed projects, e.g.: Implementing of VDA 6.1 and ISO in TŽ Migration SAP-R/2-R/3 Implementing of TPM in TŽ Projects in progress, e.g.: Implementing of APS in TŽ Implementing of Process Management 2nd stage Security of IS according ISO

26 What are we expecting in the nearest future? Outlook and Conclusion

27 Direction and Development Goals of TŽ Partnership Strengthening the cooperation and partnership with suppliers and customers Optimalization of orders, awareness of customers Regional activities road transport, development of the region Cooperation with essential surrounding investment incentives, financial sources from ECSF funds Cross factory & country research 27

28 Direction and Development Goals of TŽ Technology Staff Zero defects => Top quality (ability to reach it repeatedly) => obvious prerequisite 100 % availability of technology Innovation (anticipating and meeting customers requirements), investments (modernization of Blooming and Reversing Mill, annealing furnaces for bars and wires, STAKU lines #2, #3 etc.) Ecology-friendly production (dedusting of the BOF plant etc.) High productivity low costs, individual and team top performance, Hiring young experts, training, experience and knowledge sharing, innovative activities Accident free steel 28

29 Direction and Development Goals of TŽ Management Optimizing of the activities within the TŽ/MS Group, process management, sharing, standardization Product chains acquisitions, new investment Implementing of management systems compatible with our customers (IT, KAIZEN, TPS, ) Utilization of APS system 29

30 Conclusion Boom in steel industry continues but The technological requirements on steel products will increase The strong one can control their production capacities depending on demand The threat from East will grow The metallurgical basic industry will move to raw materials sources, gradually Our way - dynamics, courage, creativity, development of manpower, responsibility for the region Sustaining our vision advanced industrial company based on steelmaking tradition 30