Mr. Heimann, last year SMS celebrated its 150th anniversary. Without being a partner to the metals industry, this would not have been possible. Now we are talking about lifecycle partnership. Can you describe the background to this concept?
Jan Heimann —The days when SMS was merely a plant manufacturer are long gone. As a system supplier, all our plants can run with our own electrical and automation equipment. Not only that, we are also a major service company, just look at our more than 30 maintenance and repair workshops all over the world. Ten years ago, we added digitalization to the package. This was an important step, as it opens up new possibilities for optimization of all kinds.
With this combined expertise of plant engineering, project handling, electrics, automation, digitalization, and classical services, we have everything it takes to provide full lifecycle support to our customers and become their performance partner. Not just in terms of equipment performance, but also in terms of sustainable overall performance.
To put this into practice, we have to see the world through the eyes of the customer. And to be frank, for our customers, their plants are a tool for them to earn money. What we want to do is jointly develop ideas on how to increase profitability, improve product quality, boost production efficiency, or whatever our customer’s strategic focus is on. We help metal producers to concentrate on their core business and the activities that directly add value by offering services covering the entire lifecycle, ranging from training and education, through digital and remote operation support and optimization, up to performance-based maintenance services.
You say that we want to see the world through the eyes of our customers. Yet all our customers are different. How do we adapt our offerings to their individual situation?
For sure, our customer range spans from medium-sized companies with a dedicated portfolio like aluminum extrusion to integrated, global industry leaders who cover the complete production chain from mining to the finished product. However, all our customers are doing business in a highly complex environment with intense competition, increased demands on lead times and quality, rising energy prices, changes in the world of labor, or the big topic of decarbonization. That is why we have developed a toolbox of services from which we tailor our solutions.
Let me illustrate this with projects such as H2 Green Steel, Hybar, or similar start-ups. Of course, it is our technology and project handling expertise that counts for customers. But we see that the services we offer are just as important. Our toolbox helps them to get their business running smoothly.
Beyond the supply of plants and equipment, how do we support these “start-ups” in the initial phase?
These greenfield companies begin with an extremely lean setup and a small team of people. Many have a background in the financial industry and initially lack experience in the metals sector. They invest for profitability reasons and not because they have a history in this industry. However, operating a plant that produces steel or any other metal is not a business that grows gradually and organically. Within just two to three years, you need to set up a large company comprising production facilities, infrastructure, operating crews, maintenance teams, and the related ecosystem, including service contractors. This means there are very basic, yet fundamental, questions that need to be answered concerning the number of staff needed as well as their respective qualifications. That's sometimes a challenging thing to do, since many greenfield companies start in rather remote areas, where qualified employees are not available at such short notice. We help our customers to set up the requisite processes and teams.
If required, we even take over certain operations from the get-go. With large-scale greenfield projects, in particular, companies want to focus on production and get things up and running as soon as possible. In a producing industry like ours, unplanned downtimes are a hypersensitive issue. We offer to set up workshops and take over the maintenance of complete lines, including warehousing and the provision of operational change parts. This way, our customers shift their CAPEX to OPEX, which helps the business to generate a positive cash flow and get into the profit zone earlier. As a result, customers can focus on their core operations and utilize workforce capacities more productively.
We believe that we perform much better than other suppliers.
With H2 Green Steel, we have agreed a twelve-year service and maintenance contract. We will operate a mold and segment workshop for the CSP caster and roll shops for the CSP Nexus plant as well as for cold mill and strip processing lines. In total, SMS is investing around 100 million euros and will employ around 150 staff. With this investment, we are also creating the infrastructure to service other steelmakers in Scandinavia.
It may be that not all of our customers know that we have been doing this kind of outsourcing for many years now. We currently manage the maintenance/operation of customer assets amounting to about 100 million tons of liquid crude steel. For example, we have had running contracts for autonomous maintenance services with Cleveland-Cliffs in the US and with Kazchrome in Kazakhstan for more than ten years now. And we just concluded a contract with JSW Steel in India for the maintenance of a slab caster at their Vijayanagar site.
What do these service contracts typically look like?
In all these projects, we strive to establish a 100% customer-focused business model. We call this integrated performance services. This means we are heavily integrated into our customers’ processes and are paid based on our performance.
However, the first step is to define the baseline from which we measure our performance. In the beginning, we are paid according to a “cost plus fee model” based on an “open book” policy of complete transparency. Then we shift to the payment of performance based on either production or availability, or a combination of different KPIs. We believe that we perform much better than other suppliers, as we draw on our experience of maintaining similar plants and we are able to integrate state-of-the-art digital tools and equipment into our maintenance. So, it’s a win-win situation for the customer and for SMS. In addition, outsourcing releases resources that can be utilized to optimize core production processes, which again increases productivity and product quality.
What other challenges do companies face in this initial phase?
When it comes to plant technology, supplying the plant and its physical assets is not an end in itself. Equipment must be integrated into a consistent process. This integration process sometimes involves multiple suppliers, each with individual products, standards, platform, interfaces, and so forth. Integration efforts are a major thread in such a project.
The total costs of poorly integrated solutions can be far higher than the initial investment made. On the one hand, additional integration costs can blow the initial CAPEX investment budget. On the other hand, the process will never be able to reach its full potential, thus negatively impacting yield and product quality. We help our customers to reduce these integration risks by supplying everything from a single source.
After the plant is put into operation, production processes and peripheral operations do not usually run without any issues. There is always a learning curve. With our digital tools, we help our customers shorten that learning curve. Already during commissioning, we provide the planned operating personnel with both theoretical and practical training. Using digital twins, we simulate production processes and optimize the process automation system. We thus streamline production processes right from the outset.
What are the next steps in the lifecycle after the ramp-up phase?
Once operation is underway, our digital tools – including our MES production planning suite, QES quality management suite, or Viridis energy management suite – help operators gain insights into the equipment and the process. Our digital tools focus on providing operators with real, actionable items, which can either be simply presented to the operator or fed back into the process as part of a closed-loop optimization.
By deploying tailored AI-based applications, we also enable operators to proactively interact with the process. Our Genius CM condition monitoring system, for instance, analyzes production processes based on sensor and level 2 data. It enables operators to predict malfunctions of certain features and even allows them to verify that the equipment is fit to produce a certain quality or product even before production starts. This allows you to derive and take corresponding action before commencing production.
We also combine digital platforms and services. For example, when a customer monitors the asset health of a component with our Genius CM system, we extend the warranty of the core equipment, as we can be sure that its service life will far exceed the standard period.
What’s more, we offer continuous support for production processes, technology, and maintenance. An example of this is our X-Pact Service hotline, an expert diagnostics platform for automation systems offering 24/7 support.
We have everything it takes for full lifecycle support
Up to now, we have talked a lot about start-ups, but these are a real exception in the world of metals. What about the established steel, aluminum, and copper producers? What is our lifecycle approach to these customers?
Of course, these customers are quite different. They have an excellent level of production expertise, they know their mills and plants by heart, and they have well-established maintenance procedures. However, as metallurgical plants run for decades, the assets slowly deteriorate over the course of time until many producers eventually run into serious quality issues. Moreover, in most cases, these issues are not related to a single part or problem but rather have multiple causes. Everything is interconnected and it is extremely complex to untangle the knot.
Let me give you an example. One customer asked for an offer for load cells in the finishing stands of its hot strip mill. We received the order and supplied the load cells, but this did not solve the problem. We got into discussions and learned that the customer faced severe issues with the coil quality and had high downtimes due to strip flow problems. The replacement of the load cells was only one of many attempts to get a handle on these problems.
This trial-and-error approach does not get you any further. A thorough analysis is needed to get down to the real causes of the problem. Unfortunately, many customers in their day-to-day business do not have the capacity for such a root cause analysis. And this is exactly what we bring to the table: oftentimes, we know these problems from other cases. We have specialists and the relevant resources to analyze a topic from all perspectives. As I said, we not only build the plants, but we are also familiar with automation, we have the digital tools, and we have extensive experience in maintenance.
How did you proceed in this specific case?
We agreed on a four-step approach. First, we dived into the analysis with all our expertise and tools, but also incorporated the feedback from production and the maintenance crew. Second, we drew up a holistic concept for the entire mill with measures in all parts of the plant, from the slab sizing press to the downcoilers. Third is the implementation of the action plan by the customer. Finally, working together with the customer, we evaluate the measures and suggest implementing strategies such as condition monitoring or regular inspections to prevent these issues in the future.
There is one important thing to add. In the implementation phase, the customer is free to choose any supplier for the different measures. To put it in a nutshell: It is not our goal to become the preferred supplier for load cells or for the machining of mill stands, although we also offer this, of course. In this specific case, we have become the preferred supplier for strip quality and plant availability. Or to put it another way: Our philosophy is not to sell products to the customer, but to work together to develop the solutions needed and enter into a lifetime partnership.
That sounds convincing, but tell me, how do we make sure that we actually live this philosophy?
We know for ourselves about the complexity of SMS and that we have sometimes tended to present technology instead of solutions. That is why we have now completely restructured our services setup. We have eliminated the traditional separation between the Electrical and Automation Systems, SMS digital and Technical Service divisions. We have integrated more than 2,000 experts into one comprehensive entity called “Automation, Digital & Service Solutions” , in order to streamline organizational structures and foster collaboration. Our goal is to provide advanced integrated solutions that strengthen customer ties by providing tangible benefits both in the traditional OEM business and in the service business. This way, we can enhance the efficiency and quality of services by reducing interfaces and promote the synergies between equipment, automation, digitalization, and services. There is hidden potential in all our customers’ plants and we are ready to leverage it.