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Magnitogorsk Iron and Steel Works (MMK) is one of the world's largest steel producers and holds a leading position among Russian ferrous metallurgy enterprises. The company's digitalization plans are almost a hundred initiatives based on 19 key technologies. The CIO, Vadim Feoktisov, told CNews what helps MMK to enter the top 5 most profitable metallurgical companies for investors, how the largest HR system in the industry is developing, which projects are being relied on this year and why cloud digitalization of planning systems is needed. 

«Digitization will bring us an additional profit of about $ 140-160 million»

_{MMK is a large metallurgical complex with a full production cycle. Thus, in 2019, the company produced 12.5 million tons of steel and sold 11.3 million tons of metal products, which allows it to occupy a leading position in the industry on a Russian and European scale.Thanks to this, the company's revenue amounted to $ 7.566 billion with a total capital investment of $ 833 million MMK ranks among the top 5 most profitable metallurgical companies for investors, regularly receives awards for innovations in steel production, new procurement practices, and leads industry ratings for certain types of products. All capital construction projects in one format or another involve IT specialists who are engaged in a full range of work, from infrastructure design to installation work and software launch.}

CNews: Does the current situation in the industry somehow change due to the impact of external factors of recent times?

Vadim Feoktistov: Of course, the global market for rolled metal products is under pressure due to the almost universal decline in economic activity. Nevertheless, we continue to implement the investment program in accordance with our development strategy. Do we now consider the impact to be unfavorable? the environment for our investment projects is minimal.

CNews: What role does IT play in the development of a company? Has it changed over the years?

Vadim Feoktistov: The company's management has always paid and continues to pay great attention to the development of information technologies. Therefore, over the past 15 years, we have managed to create the foundation on which a system is built that meets the requirements of the digital enterprise. Functioning IT systems have a direct impact on the production and economic activities of the enterprise. This imposes a great responsibility on ensuring the continuity of the services, ensuring their availability 24/7.

Vadim Feoktistov: Our "Digitalization Strategy 2025" covers 18 functional business areas and includes the implementation of 98 initiatives

IT development in the company does not occur spontaneously, but within the framework of the information technology development strategy. By the way, it is not static. We regularly analyze its implementation and make changes and additions, if it is dictated by current trends. Right now, a project is underway to update the strategy in accordance with digitalization plans.

CNews: MMK has serious expenses for digitalization. How do you calculate the investment and how long is it planned to recoup it?

Vadim Feoktistov: Yes, in accordance with the developed digitalization strategy, we have planned an investment of about 5 billion rubles. At the same time, we assume that in the process of implementing the strategy, it will be regularly updated to take into account changing conditions and emerging new technologies.

The expected effect from the implementation of digitalization strategy initiatives is + 4.5% EBITDA. By 2025, in numerical terms, it will be $ 140-160 million.

Projects «Industry 4.0» saved $ 25 million

CNews: The Industry 4.0 concept is being implemented at MMK in several areas: product lifecycle management, Smart Factory, the industrial Internet of Things, security and human resources engineering. What achievements are you especially proud of?

Vadim Feoktistov: Indeed, Industry 4.0, as a strategic direction for MMK's development, appeared in the portfolio of strategic initiatives in 2018. At the same time, the first draft of the Industry 4.0 project portfolio was formed. It includes projects grouped into several thematic blocks. It was their implementation that allowed us to talk about digitalization as an independent direction of enterprise development. I will give a few examples:

As you know, steel smelting is a complex physical and chemical process. At the same time, there are strict requirements for the chemical composition and content of elements in the required grade. In this situation, it becomes difficult and often impossible for a steelmaker to assess the influence of these factors on the final result, the risk of going beyond the normalized range increases, which can lead to the production of products of inadequate quality. MMK has accumulated a large amount of statistical data on the technological process of steel smelting in the oxygen-converter shop and a tremendous experience of the personnel in conducting the technological process. The combination of these factors became the foundation for creating a model that, depending on the required chemical composition and the initial conditions of the technological process, makes it possible to solve the problem of optimizing the consumption of ferroalloys and additional materials with the highest possible efficiency. This project was named "Sniper". The algorithm is based on a combination of a physical-chemical model of steelmaking and machine learning methods. The result of the system operation is recommendations for technologists on dosing of ferroalloys and additional materials for each converter melting.

Vadim Feoktistov: In 2019, MMK produced 12.5 million tonnes of steel.

Another important project is the creation of an integrated information and control system for end-to-end modeling and optimization of sinter-coke-blast furnace production, which is designed to optimize the production processes of the first redistribution. This system allows for strategic (technical and economic) and operational management of the production process. At the upper strategic level, the quality of coke and the proportion of sinter are optimally planned according to the criterion of the minimum cost of steel. The system uses the results of calculations based on models for optimizing the supply and consumption of coal and iron ore as the initial data. Operational management consists in stabilizing the quality of raw materials entering the blast furnace shop. The developed model makes it possible to form advice to the foreman on the operational control of the thermal state of the blast furnace. When developing a complex multi-level model, both modern technologies (big data and artificial neural networks) and traditional physicochemical models are used.

HR engineering project implemented. The HR Director of the enterprise set the task to implement the most convenient for personnel management and transparent for users a job placement tool that would increase the transparency of the recruitment process and implement a policy of equal open access for applicants to information about MMK's vacancies. The “Robot-Recruiter” system was developed, which uses the most advanced machine learning technologies, document recognition, video interviews, information kiosks, mobile applications, which allows to select candidates without human participation and conduct them through all stages of hiring before the interview.

In addition, the process of approving applications for issuing personal passes was robotized, as a result of which the time for processing applications, making passes was reduced, and the human factor was eliminated during its registration. Now the application for a pass comes from the Robot-Recruiter system, and the document itself in the form of a link with a QR code can be presented on a mobile device for reading by a security guard when passing a checkpoint.

Also, using machine learning, a system for video identification of workers when passing an occupational safety examination was developed and put into commercial operation. Pilot projects are planned for video identification of employees for access to the territory of the enterprise through the checkpoint and compliance with the requirements for moving along stairs (the need to hold on to the railing and the prohibition of using cell phones while moving).

CNews: Do you see the economic results of the Industry 4.0 implementation?

Vadim Feoktistov: Yes. It can be stated that all projects implemented under the Industry 4.0 initiative have saved the company about $ 25 million. For example, the Sniper project alone allows the company to save about $ 4 million annually. The effect of the introduction of an integrated information management system for end-to-end modeling and optimization of sinter-coke-blast furnace production can amount to about $ 14.3 million, and from the introduction of automatic control systems for steam boiler modes - almost $ 2 million per year.

In addition, a number of social projects have been implemented. The My MMK application is very popular among MMK employees. It allows you to get all the information the employee needs - his personal data, view the vacation schedule and, using the chat bot integrated into the application, schedule a specific start date and duration of the vacation, receive a notification for receiving overalls, information about the accrued salary, which made it possible to refuse to print pay slips ... Of the latest innovations, the application has become one of the sources of informing employees about the measures taken by the company to protect against viral infection. Now more than 40 thousand employees use the application.

The iClient mobile application has been implemented for our customers, which allows you to receive information on the status of order execution in real time, view shipping documents for current orders, as well as the status of settlements with MMK.

The corporate information system operating at the enterprise based on Oracle E-Business Suite and the implemented system of operational scheduling of production made it possible to implement a mobile application for the sales service that checks the feasibility of potential orders, both technological and production. In this case, the system calculates the order execution time with an accuracy of plus or minus 3 days.

«ERP from Oracle is the heart, core and foundation for all corporate information systems»

CNews: MMK has been working in a unified information system since 2005, consistently modernizing production and expanding strategic cooperation with Oracle. What competitive advantages does it provide?

Vadim Feoktistov: We have almost twenty years of partnership with Oracle. And we were the first in the industry to translate our business processes into the ERP system Oracle E-Business Suite. All these years we have successfully operated and developed the system.

ERP from Oracle is the heart, core and basis for the entire corporate information system - a single information space for key organizations and departments within the MMK group, a source of the world's best business practices, and a platform for implementing strategic Industry 4.0 initiatives. This is the number one solution in the ERP systems market, it already contains the best business process practices, and MMK's task is to use them correctly.
The Oracle solution provides users with unified corporate governance standards in the Group, uniformity in input interfaces, traceability of information from input of primary documents to impact on financial results, painless replication of the system without the need to adjust to the inevitable nuances of other vendors' systems, automatic replication of financial and management reporting.

Vadim Feoktistov: We were the first in the industry to transfer our business processes to the ERP system Oracle E-Business Suite

Using solutions from one vendor is also an opportunity to use tools for seamless integration of its products, which significantly reduces the cost of their implementation. Their maintenance and support, personnel training are also cheaper. A unified approach is used to create and maintain services, infrastructure unification.

Despite the described advantages, MMK does not limit itself to one vendor and, if necessary, selects the best-in-class solutions for specialized tasks, ensuring integration with a single corporate information system.

CNews: For what business tasks are Oracle solutions applied?

Vadim Feoktistov: Oracle solutions cover all the key processes of MMK. The unified system includes the management of production (continuous and discrete), inventory, repairs, purchases (including the electronic trading platform), finance, personnel, projects, orders and sales, and it also calculates the cost price. It reflects the results of the financial and economic activities of the plant. E-marketplace, e-store, mobile applications for internal use and external consumers are also based on Oracle products.

CNews: Tell us about one of the most significant projects - modernization of MMK's ERP system and transition to an advanced version?

Vadim Feoktistov: We started modernization in 2018, we are updating the system to the latest version of Oracle E-Business Suite R12. The task of migrating existing business processes to MMK has already been completed: they have been improved, the system itself has been simplified, the number of manual operations and customizations has decreased, and the efficiency of the system as a whole has increased. In addition, the system was expanded, it was replicated at the enterprises of the OJSC MMK-METIZ Group and LLC OSK.

At the moment, we continue to expand the Oracle system to other production business units that are part of the PJSC MMK Group. The creation of a single information space made it possible to speed up and qualitatively improve the process of making effective management decisions.

Already now the Unified CIS is a platform for Industry 4.0, on which all information flows of the company are integrated.

In addition, thanks to the transition to the R12 version, we come to new functionality, in particular - to the use of cloud technologies. MMK is already implementing, piloting, or considering for implementation cloud applications for creating a self-service purchasing system (Oracle Self Service Procurement Cloud), innovation management (Innovation Management Cloud), warehouse management (Oracle Warehouse Management System) and transport (Oracle Transportation Management).

Vadim Feoktistov: The unified system at MMK includes the management of production, inventory, repairs, purchases, finance, personnel, projects, orders and sales.

What has already been implemented? Fully automatic receipt of final accounting, tax and international reporting from the created single repository of accounting records. In the long term, this will reduce the time required for preparing monthly financial statements. The availability of the storage facility will allow switching to tax monitoring, which will reduce the tax period and tax risks in terms of fines and penalties.

We have a new module called "Auto Payment", which allows us to organize a single payment process for MMK and the group's companies in one module and according to uniform rules. Automatic creation of payments is carried out in accordance with the terms of the agreement, electronic approval of the payment request card.

New improved MRO processes have been introduced, including the full scope of reference data for the automation of the planning system and mobile technologies. The potential economic effect of switching to new processes using Oracle functionality by an external consulting company is estimated at 1 billion rubles. The introduction of the new system made it possible to prepare the basis for equipment reliability management, which should also lead to the optimization of MRO costs and an improvement in the quality of MRO.

The "Quality" module allows you to register the results of incoming control in the CIS and then take this information into account when calculating the supplier's rating.

And the MMK Supplier mobile application makes it possible to receive information about tenders and promptly respond to price changes. Also with its help you can study information about contracts, deliveries, invoices.

CNews: How has procurement changed as a result and how are communications with suppliers digitized?

Vadim Feoktistov: Firstly, the system implements the automation of the end-to-end business process: from the formation of a demand to the issue. The relationship between the blocks of supply processes has been organized: the formation of requirements, the procedure for selecting a supplier, the conclusion of contractual relations, supplies from the supplier, storage in a warehouse and the provision of structural units. The installation of automated checks at checkpoints allows you to control the availability of a budget, demand, statuses of sighting routes, contract statuses and suppliers. All this made it possible to simplify the mechanism for tracking the life cycle of the procurement process and shorten its time.

The procedure for selecting a supplier is 80% carried out through our own e-marketplace. This enables MMK to expand its competitive environment, lower prices, and ensure transparent and informed choice of suppliers.

As I said, the MMK Supplier mobile application has been developed, which expands the capabilities of the ETP, allows suppliers to quickly receive the necessary information and respond to changes.

The presence of control points made it possible to introduce a system of KPIs for suppliers, which improves the quality of the supply service in terms of fulfilling orders and, as a result, timely provision of structural units.

All document approval processes take place in the CIS (applications, auction results, technical characteristics of suppliers' positions, specifications).

In addition, integration with EDM has been implemented to organize electronic document flow with the supplier. This made it possible to reduce the number of errors and shorten the time for signing contract documents and subsequent adjustments due to the elimination of the "human" factor when registering receipts. The time for registration of receipt operations in the CIS has been reduced. Transparency of procurement has appeared, we have left paperwork.

Vadim Feoktistov: MMK's HR system processes information on nearly 60 thousand employees

Information on stocks allows you to efficiently manage logistics processes for the provision of structural units.

Secondly, the supplier's personal account has been developed. Suppliers post their statutory documents independently, without using e-mail, which makes it possible to speed up and simplify the process of subsequent approval within MMK.

A supplier's questionnaire is placed in the personal account, this allows you to receive feedback from suppliers and plan potential measures to improve the quality of the ETP. Supplier rating calculation has been implemented - an assessment based on various criteria of contractual relations (delivery on time, quality, claims), which allows you to form a final score and use it in the process of selecting a supplier, as a result, it makes it possible to improve the quality of the selected supplier.

CNews: MMK has the largest personnel management system in the industry, even employees of the Magnitogorsk Metal newspaper are included in MMK's HR-system on Oracle. What does this give the company?

Vadim Feoktistov: The corporate information system based on Oracle E-Business Suite allows the use of personnel management methodology and policy uniform throughout PJSC MMK: personnel records, payroll accounting, reporting in the standard established by law, which, in turn, leads to the transparency of personnel costs, allows optimal use of its number.

Now, in addition to PJSC MMK, the HR-system of 30 subsidiaries, in total, processes information about almost 60 thousand employees. The implementation of the strategic initiative of the company's management continues - connecting all organizations of the Group of Companies to the HR-system.

CNews: What are your future plans for digitalization? Planning to move to the cloud? If so, for what tasks?

Vadim Feoktistov: Yes, further digitalization is planned using cloud and mobile technologies. In particular, a project has begun to create a self-service procurement system for structural divisions on the platform of the Oracle Self Service Procurement Cloud software product. The employee, using online stores, will select the necessary goods from the supplier's catalog and register the purchase procedure in the system. In this way, the redistribution of procurement functions is achieved, administrative costs are reduced due to the availability of information and the time required to meet requirements, as well as centralized procurement management through catalogs.

In addition, we initiated a project to create a unified system for registering, storing and monitoring MMK's ideas, programs and initiatives, as well as increasing the efficiency of the planning and resource allocation process on the platform of Oracle cloud software products (Innovation Management Cloud and Project Management Cloud).

Vadim Feoktistov: MMK is in the top 5 most profitable metallurgical companies for investors

A project to create an automated warehouse management system based on Oracle Warehouse Management System is under development. The implementation of this solution increases the efficiency of warehouse management by scheduling operations, optimizing the movement of the warehouse, performing operations according to the instructions of the system, address storage system, carrying out all operations, including inventories, using mobile terminals.

CNews: Are you considering the introduction of artificial intelligence, robotics, autonomous devices directly in production? Are these decisions ready to "face reality"?

Vadim Feoktistov: We are closely following the development of these areas, together with the technological staff we are assessing the possibility of using certain components to automate business processes. But here it should be noted that metallurgy is a complex high-tech industry with many production processes, the violation of which can provoke man-made accidents. Therefore, when choosing a digital solution, we adhere to a strategy of prudence and caution. Digitalization should help, and not pose insoluble tasks for people.

CNews: Can AI systems, software robots, and chat bots replace “ordinary” MMK employees?

Vadim Feoktistov: We have a positive practice of using chat bots to automate business processes. We have established a software robotization (RPA) competence center that is developing successfully. Now the plant employs more than 50 software robots involved in the main functional areas. These are finance, economics, personnel, accounting, supply, logistics and others. The developed software robots execute orders for work books, analyze the use of transport, keep records of labor productivity, collect and organize data from various sources, verify various documents, generate reports and statements, interact with banks. We are also working on expanding the RPA functionality using innovative artificial intelligence technologies, machine learning and natural language recognition methods.

But we do not believe that automation is a key factor influencing the number of employees in the company. The main vector of these processes is to increase efficiency both by reducing costs and by creating new value and new opportunities for MMK employees.

Large-scale automation and the introduction of digital innovations lead to the fact that the activities of a significant number of employees are transforming, they have new functions and new tools that require appropriate skills, constant involvement, and personal development. This is where we see the main changes taking place with our staff in this context.

CNews: What technologies will help MMK develop its business in the coming years?

Vadim Feoktistov: As noted earlier, metallurgy is a high-tech industry. Therefore, the development and use of digital solutions is more diverse both from the point of view of the direct application of digital technologies, and from the point of view of the applicability of these technologies to various business processes of an enterprise.

In our strategy, we have identified 19 digital technologies that will be used to achieve MMK's strategic goals. This is the use of modeling systems based on neural technologies and artificial intelligence, computer vision and recognition systems, VR / AR solutions, technologies for positioning moving objects in space, RPA.

Source: oracle.cnews.ru