Loughborough operations research saves China’s Baosteel $76 million
A Loughborough University Professor is part of an international research team that recommended production and logistics efficiencies to help one of the world’s largest iron and steel factories save more than $76 million.
For more than a decade, Professor Jiyin Liu from the School of Business and Economics and colleagues at the Logistics Institute of Northeastern University (China) and the RH Smith School of Business (University of Maryland) worked with Baosteel - China’s largest and the world’s third largest steel company - to transform its in-plant production and logistics operations in four key areas of its entire steel production process.
The team looked at ways of increasing the efficiency of steel slab production, new methods of scheduling production and allocating products to reduce inventory and storage costs and improve customer satisfaction, how to group steel coils during the batch annealing process to improve product quality and reduce energy consumption, and improvements to shipping: how to select most efficiently what gets loaded and how to plan the stowage onboard to reduce the cost of shuffling and maintain the balance of the ship.
Researchers built optimisation models for these decision problems and proposed efficient solution methods. They developed four different decision support systems for Baosteel, one for each of the key areas, and Baosteel implemented all four.
According to Baosteel, the team’s decision support systems significantly reduced their production, inventory and energy consumption costs, as well as increasing revenue and improving product quality.
Specifically, the company saw a 16.8 per cent improvement of its IT and operations management capability, a nine per cent reduction of inventory, annual reductions of 293,967 tons of standard coal consumption and 585,770 tons of carbon dioxide emissions, as well as an increase in overall product quality and customer satisfaction.
In addition to these environmental and management benefits, Baosteel’s monetary savings have been immense; by implementing the developed decision support systems, and changing its planning and management culture, the company saved more than $76 million between 2007 and 2012, and will continue to save $19 million every year from now on.
Professor Liu said:
“The influence of the research is immense and very exciting for us. With increased awareness of the role operations research plays in manufacturing, the adoption of scientific approaches instead of experience-based approaches will have a positive influence on similar companies in China.
“Because steel production is an energy-intensive industry, our research is important not just because of saving a specific company money, but because the benefits affect the global environment as well.”
The team was recently named as a finalist for the Institute for Operations Research and the Management Sciences (INFORMS®) Franz Edelman Award for Achievement in Operations Research and the Management Sciences, recognizing the team as world-leading in their field.
Notes for editors
Press release reference number: PR 13/139
- The School of Business and Economics is consistently ranked in the UK Top 10 for business, management, accounting and finance programmes, and is one of just 1% of business schools in the world to be both EQUIS and AMBA accredited.
- Professor Jiyin Liu is Professor of Operations Management at the School of Business and Economics. His research interests include operations planning and scheduling in production, logistics and supply chains, mathematical modelling and heuristic solution of practical operations problems.
He has published widely. His research papers appeared in academic journals such as Decision Support Systems, European Journal of Operational Research, IEEE Transactions, IIE Transactions, International Journal of Production Research, Journal of the Operational Research Society, Naval Research Logistics, Operations Research, and Transportation Research. He served on the editorial board of Journal of Scheduling and is an editorial board member of Journal of the Chinese Institute of Industrial Engineers.
Jiyin’s research has been supported by both research grants and industry. He consulted for Hongkong International Terminals, Hong Kong Air Cargo Terminals Limited, Jardine Logistics, JOS Technology Group, Philips Electronics, and other companies. Prior to being the recipient of a 2013 Franz Edelman Finalist Award, Jiyin received a Franz Edelman Finalist Award in 2004 for his work on decision support in container terminal operations.
He is a Visiting Chair Professor of Management Science and Engineering at Northeastern University, under the Cheung Kong Scholarship Scheme of the Chinese Ministry of Education.
About Loughborough University
Loughborough is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.
It was awarded the coveted Sunday Times University of the Year 2008-09 title, and is consistently ranked in the top twenty of UK universities in national newspaper league tables. It has been voted England's Best Student Experience for six years running in the Times Higher Education league, and in recognition of its contribution to the sector, the University has been awarded six Queen's Anniversary Prizes.
It is a member of the 1994 Group of 11 leading research-intensive universities. The Group was established in 1994 to promote excellence in university research and teaching. Each member undertakes diverse and high-quality research, while ensuring excellent levels of teaching and student experience.