2013 Edelman Finalist Baosteel

Operations Research Transforms Baosteel’s Operations

Shanghai Baoshan Iron and Steel Complex (a.k.a. Baosteel) is the China's largest and the world's third largest steel company. Since it was established in 1978, Baosteel has been using state-of-the-art manufacturing facilities, processing technologies, and IT systems. However, until recently, Baosteel had mainly relied on rule and experience based manual planning methods to make production and logistics operations decisions, which resulted in frequent occurrence of tardy orders on the one hand, and high production, inventory, and logistics costs on the other. In 2005, the research team was tasked to develop advanced Operations Research (OR) based planning tools to improve the operational efficiency of the Baosteel's Shanghai plant throughout its entire production process. In the following six years, we developed various novel optimization algorithms and tailored metaheuristics and implemented four decision support systems (DSSs) to replace the manual planning methods at the Shanghai plant. The use of DSSs has brought scientific operations management to Baosteel and transformed the Shanghai plant's production and final product delivery operations. It has not only significantly increased Shanghai plant's productivity and product quality, but also greatly reduced energy and resource consumptions. It is estimated that in the period from 2007 through 2012, the use of the DSSs at the Shanghai plant has generated a total cumulative economic benefit of US $76.81 million. Based on the current usage of the DSSs at the Shanghai plant, it is also estimated that, the DSSs will continue to generate an annual economic benefit of US $19.80 million, which represents a 16.8% improvement of Baosteel's IT and operations management capability. In addition, due to reduced energy consumption, the carbon dioxide emission at Baosteel is decreased by 585,770 tons annually, making a significant impact on the environment. As a key state-owned enterprise (SOE) in China, Baosteel's pioneering experience in adopting OR based planning methods for its operations management has set a great precedence for numerous SOEs in both steel and non-steel industries in China to follow.