Optimizing value through an

integrated approach in the

process manufacturing industry
Microsoft Services
Author:
Guru Bharadwaj, Enterprise Strategy Advisor, Microsoft Services
Contributors:
Bhasker Joshi, Ambar Mukherjee, Brian Loomis and Ellyn Foltz
Publication Date:
September 2012
Version:
1.0
Guru Bharadwaj is a distinguished strategy advisor and advises enterprise
clients on business and technology strategies. Gurus focus is to create and
realize business value through productive use of technology for Microsofts
enterprise clients. His expertise spans enterprise architecture, business and
technology transformation, innovation, portfolio planning, and governance.
2012 Microsoft Corporation. All rights reserved. This document is provided "as-is." Information
and views expressed in this document, including URL and other Internet Web site references, may
change without notice. You bear the risk of using it.
This document does not provide you with any legal rights to any intellectual property in any
Microsoft product. You may copy and use this document for your internal, reference purposes. This
document is confidential and proprietary to Microsoft. It is disclosed and can be used only pursuant
to a non-disclosure agreement.
A Microsoft
Services Enterprise
Architecture Paper
Enterprise Architecture
1
Table of Contents
1. EXECUTIVE SUMMARY ..............................................................................................3
2. PROCESS MANUFACTURING INDUSTRY ..............................................................4
3. STEEL INDUSTRY TRENDS ........................................................................................4
4. MARKET DRIVERS AND AREAS OF FOCUS ..........................................................6
5. TECHNOLOGY AS A KEY ENABLER ........................................................................7
6. ENTERPRISE ARCHITECTURE APPROACH ............................................................8
7. OTHER CONSIDERATIONS ......................................................................................10
8. HOW MICROSOFT HELPS ......................................................................................10
9. CONCLUSION ............................................................................................................13
10. REFERENCES ............................................................................................................13
2
1. Executive Summary
The process industry as a whole and the steel industry in particular have started
to recover and are expected to experience double-digit growth in coming years
because of increased consumption and utilization rates. Although production
and consumption levels have improved, volatility in mineral and raw material
prices as well as unpredictable demand call for a prudent approach to
optimizing operations and increasing their agility. Newer market trends and
economies also require enterprises to identify flexible business models that
allow them to take advantage of inorganic growth and service revenue
opportunities seamlessly.
In a business climate where enterprises are experiencing increased competitive
pressure and shifting market conditions, organizations that thrive have defined
capabilities and frameworks that allow them to act quickly and decisively. In
turn, they can accelerate change to seize business opportunities. In such a
scenario, technology becomes a key enabler in linking business strategies,
processes, and operations uniformly across the enterprise fabric for better value
realization.
Enterprise architecture as a discipline provides such a foundation for an
organization to align strategic objectives with opportunities for change. When
combined with complementary approaches such as business process
management, master data management, and analytics, enterprise architecture
forms the key basis for value. Such a foundation is essential to realize greater
agility and value with newer technology paradigms such as cloud-based
business models, Internet of things, and big data analytics.
Microsoft, together with its industry partners, provides process manufacturing
companies with integrated world-class solutions that enable business and
technical people to conduct and optimize critical areas of their organizations.
3
2. Process manufacturing
industry
Although the process industry as a whole suffered from the latest economic
recession, it started to recover and grow in 2011 and is expected to continue to
grow through 2014. This recovery is supported by a slowly improving global
economy, attractive government policies, and increasing use of industry
products in the healthcare and pharmaceutical sectors and other industries.
Plastic and resin manufacturing continues to grow because of the increasing
use of its products by downstream manufacturers, wholesalers, and
construction companies. Paper and metal demand has increased in the past
couple of years for packaging and other industrial uses. The process industry,
particularly chemical manufacturing, continues to face challenges in the areas
of patent development and regulatory controls.
3. Steel industry trends
The last couple of years appear to have trended stably for the global steel
industry compared to the volatility in steel and raw material prices experienced
during the financial crisis. Consumption and utilization rates have picked up in
most major economies, with consumption surpassing its pre-crisis highs in
some countries/regions. Production and consumption levels have improved
across the globe, but excess supply has prevented steel prices from rising in
tandem with raw material prices. The timely support by the governments of
major economies through stimulus packages provided the base for the global
recovery of the steel sector. However, volatility in global steel prices is
expected to continue because of the oversupply situation and unpredictable
demand. The graph and charts in the following figure show recent volatility
in steel prices.
Figure 1. Steel production and pricing trends
4
Demand from BRIC countries (Brazil, Russia, India, and China), particularly
China, has been a key driver in growth over the last decade. India has also
registered strong demand over the last five years. However, there has not been
a significant increase in Indian steel production in the last few years because of
stringent mining and land allotment laws, which make the country a net
importer of steel. Brazil and Russia also recovered strongly from the economic
crisis and offer an avenue for higher steel production in the medium term.
Apart from China, per capita steel consumption in the BRIC nations is
significantly below the world average; however, projected economic growth in
these countries indicate a strong demand for steel going forward.
The Indian steel industry plays a significant role in the countrys economic
growth. Steel has a stronghold in the traditional sectors, such as infrastructure
and construction, automobile manufacturing, transportation, and industrial
applications. In addition, stainless steel (a steel variant) is being used in
innovative applications because of its corrosion-resistive properties.
The country has acquired a central position on the global steel map with its
giant steel mills, acquisition of global scale capacities, continuous modernization
and upgrading of old plants, improved energy efficiency, and backward
integration into global raw material sources. Global steel giants from across the
world have shown interest in the industry because of its phenomenal
performance.
5
4. Market drivers and
areas of focus
The global steel outlook for the next two to three years is cautiously optimistic.
Growth in developing economies will remain strong and continue to boost total
global steel demand. However, the modest recovery in more advanced
economies is constrained by ongoing financial uncertainty. Demand for raw
material is increasing in line with growth in steel production, but there is a
constraint on the supply side of raw material because of the lack of adequate
infrastructure and increasingly stringent environmental laws and regulations.
Beyond China, few other countries have the steel production growth capacity of
India, which is why it is strategically placed to be the next landmark on the
global steel landscape. Sufficient iron ore reserves, low per capita steel
consumption, and strong demand for steel due to strong economic growth
gives India the competitive edge over other emerging economies. India has
been a net importer of steel since 2007, and the widening difference between
demand and supply will encourage new capacities to come on stream.
Construction and infrastructure remain key steel-consuming sectors in India.
Investments in these sectors in the 2012 2017 timeframe are estimated to be
approximately US$1 trillion, and there is a corresponding increase in steel
demand. Domestic steel demand within India is expected to grow
approximately 10 12 percent on an annual basis over the next few years as the
launch of low-cost passenger cars will likely expand the market and therefore
the demand.
India is expected to become the second-largest producer by 201516. Major
capacity expansions that are expected to be operational in the next three years
include projects by JSW Steel and Steel Authority of India (SAIL). Total crude
capacity in India is expected to be approximately 112 million tons by 2015,
registering a compound annual growth rate of 9 percent. The growth potential
of the steel industry in India has attracted many global steel players, with some
entering into strategic partnerships with major Indian steel manufacturers as
they feel that green field projects will take longer to become profitable and
established companies already have an existing customer base in the region.
The industry should receive additional support from the Indian government,
with policy changes planned for iron ore mining in the areas of competitive
bidding and the transparent allocation of mineral licenses. The beneficiaries of
such policy changes will be both Indian organizations as well as global
stakeholders.
Besides a shortfall of coking coal, other bottlenecks to growth of the industry
include inadequate infrastructure in railways, roads, and ports. This shortcoming
leads to delays in rake movement, congestion, and inventory pileup at ports.
Other challenges include land acquisition delays and environmental clearances,
both of which require focus for the accelerated growth of the Indian steel
industry.
6
Figure 2.
Global steel market drivers
and areas of focus
The Indian government needs to support this strategically important industry
by increasing the exploration for raw materials and developing the enabling
infrastructure. Steel companies should increase their focus on new technologies
to increase productivity, reduce raw material costs, and expand their product
footprint. Consensus must evolve around socioeconomic and environmental
challenges, keeping in mind the window of opportunity for growth. The
successful model of the Ultra Mega Power Projects in India can be replicated in
the steel sector through the formation of special purpose vehicles for
implementing selected green field projects. The Indian steel industry, therefore,
requires structural and policy changes to achieve its strong growth potential in
the coming decade.
5. Technology as a key enabler
In a business climate of increased competitive pressure and shifting market
conditions, enterprises that thrive have defined capabilities and frameworks that
allow them to act quickly and decisively. In turn, they can accelerate change to
seize business opportunities.
The Microsoft approach to maximize the technology experience for a
manufacturing enterprise is anchored on four core principles:
n Driving innovation. To be successful in rapidly evolving emerging and
developed markets, manufacturers need to accelerate the pace of innovation,
bring their products to market quicker, and protect their intellectual property
(IP).
n Driving operational excellence. It is imperative for manufacturers to
maximize their efficiency in manufacturing operations, supply chain, sales
and marketing, and so on while minimizing their costs as they perform such
operations.
n Driving growth. Improving collaboration through the use of new social
technologies, exciting the new generation of workers, as well as focusing on
the unique needs of emerging markets are all important for growth.
n Driving technology adoption. The use of computer tablets and handheld
devices is increasing in manufacturing in general, including process
manufacturing. We see such device proliferation in manufacturing
operations, supply chain, sales and marketing, as well as product design
areas. The use of new trends in user interface, such as touch, gesture, and
voice recognition are also expected to increase in process manufacturing.
Outcomes are better managed with a holistic business approach through which
the organization takes advantage of technological advancements, including
well-managed processes, consistent information, and predictable analytics.
Enterprise architecture as a discipline provides a foundation for an organization
to align strategic objectives with opportunities for change through portfolio
gap analysis, transition planning, and architectural governance.
Some of the key results include:
n Faster, better-informed strategic and tactical decisions with validated results
n Prioritized investments to support business goals
n Improved risk management of organizational transformation
n Enterprise-level communication and visibility for people, processes, and assets
n Standardization and governance of shared business and IT building blocks
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Figure 3.
Four principles to maximize
the technology experience
6. Enterprise Architecture
approach
The process manufacturing industry and the steel industry in particular face
complex issues such as resource constraints (including the timely availability of
natural resources such as iron ore and coking coal), seasonal demand
variations, price fluctuations, stringent environmental laws, regulations, and
margin pressures posed by other metal and plastic industries. Also, the industry
is in a state of consolidation with global players emerging from the mix.
A successful steel enterprise needs to focus on a core of collaboration and
reuse of technology solutions and data in the form of services that can be
shared across workflows to improve agility and lower costs.
To ensure such collaboration becomes a reality, organizations need to address
two major roles that are especially important to achieve success: at the
enterprise architecture planning level where cross-architecture and cross-
project collaboration occurs, and also at the initiative level where solution
architecture design of reusable assets across projects occur.
A unified planning approach with enterprise architecture as the anchor and
business process management (BPM), master data management (MDM), and
enterprise manufacturing intelligence (EMI) provides holistic value to an
enterprise.
The notion of business process optimization has been around for almost a
century and was a key component of the Industrial Revolution. Yet in the last
decade, the focus in many process improvement communities shifted subtly to
BPM. The key distinction for BPM as a discipline is added focus on flexible and
dynamic process design as well as process orchestration and automation
through IT enablement. In addition to reduced cost through continued process
improvement and automation, BPM also provides the foundation for a
converged and agile business and IT responsiveness.
8
Figure 4. Enterprise architecture
anchors an integrated business
process approach
Identifying and mapping key business processes not only helps to have a
common vocabulary between business and IT, it also helps identify the key
enterprise data objects (entities) such as customers, contacts, products, and
orders. MDM is a key function that contributes significantly to enterprise
solutions including enterprise integration, service-oriented architecture (SOA),
and analytics. Master data is the base data that is used for transactions by many
systemsfor example, a product part list used by a steel manufacturer to order
from suppliers, stock manufacturing units, and calculate selling prices. A
successfully implemented MDM solution ensures that an organization does not
use multiple versions of the same reference data in different systems and parts
of its operations. As such, MDM increases data quality and assurance by
providing what is sometimes called a single version of the truth. MDM also
facilitates the exchange of data between solutions without having to do point-
to-point mappings, which saves significant time and money when
implementing major business solutions.
There is a strong need for convergence of BPM and MDM initiatives and
organizations should not treat these as disparate efforts. The ability to
synchronize an organizations master datawhether it be customer data,
product data, supplier data, or transaction dataacross applications has
tremendous value when considering process optimization opportunities. MDM
is the right glue between business process and analytics. It is impossible for
organizations to meet expected service levels without smarter analytics and
trusted single sources of data. MDM is also critical for addressing big data
scenarios, and benefits are accentuated with a trusted single source of data.
Savvy executives know that critical success factors wont be achieved unless
they are explicitly articulated in the goals and measures that drive an
organization. They know that having a laser focus on the essence of growth
and profitability is essential. But the metrics arent the only keys to success.
Manufacturers must build global views and deliver easy-to-use analytic tools to
every level of the organization to ensure the delivery of corporate success.
Such success requires an end-to-end view of critical processes from the plant
level operator to the executives at corporate headquarters.
Production level analysis is an essential capability as manufacturers work to
improve performance to meet the needs of demand-driven supply networks.
Composite applications can incorporate necessary analysis and reporting tools
so that cause-and-effect relationships can be identified at the source and poor
quality production can be minimized. At a higher level, organizations must
aggregate and distill information from multiple levels of production data
sources in a multi-layer EMI architecture and then synthesize real-time decision
support tools for numerous management roles in the organization as well.
9
7. Other considerations
As the process manufacturing industry adopts a unified technology approach
anchored on enterprise architecture, other paradigms or technology evolutions
come into consideration as well. Some of these paradigms are described in the
following list:
n Making meaningful sense of data for business value is critical in this age of
information explosion and proliferation because of machine-to-machine
(M2M), people-to-machine (P2M), and people-to-people (P2P) paradigms.
Interfaces to predictive modeling and big data solutions will provide the
necessary insights to improve business decisions.
n Services and SOA approaches will help integrate distributed enterprises
effectively. As you work to segment workloads, optimization of integration
approaches will be a key.
n So-called pay-by-the-drink models enable better penetration and usage
without setting aside big budgets for consumers/clients. The cloud also
enables newer business paradigms that are very relevant for steel
enterprises, as outlined in the seven-step prescriptive approach.
n Mobility and use of game design techniques are real options because of
mass appeal and proliferation. Look to integrate complementary approaches
as part of the journey.
n Social computing brings the people quotient of optimizing process
approach. Acknowledging enterprise social networking approaches as
relevant and integrating them will augment the value realization immensely.
8. How Microsoft helps
Microsoft and its industry partners provide process manufacturing companies
with integrated world-class solutions that enable business and technical people
to conduct and optimize critical areas of their organizations. These areas
include data collection and handling, collaborative analysis, business insight,
innovation and innovation management, customer relationship management,
decision making, regulatory control, and environmental and social
responsibility.
Microsoft has pioneered reference architecture frameworks for multiple
industries such as banking (MIRA-B), upstream oil and gas operations (MURA),
smart energy (SERA), discrete manufacturing (DIRA) and chemical and oil
refining (ChemRA). These reference architectures provide architecture building
blocks and guidance to address challenges and industry trends with
developments and capabilities of technology. DIRA and ChemRA together
address most if not all of the requirements for the process manufacturing
industry.
10
The Microsoft Enterprise Strategy Program (ESP) provides the right consultative
approach to enable integrated manufacturing operations. It focuses on
business impact and value by optimizing the use of technology to accelerate
customers toward business goals. It provides a programmatic approach that
enables business transformation, advances technology thought leadership,
fosters innovation, and maximizes the value of Microsoft products and services.
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Figure 5: Microsoft Industry reference architecture frameworks
Figure 6. Microsoft Enterprise Strategy Program
Microsofts rich global ISV partner-led solution set within the process
manufacturing industry addresses many of the key business solution areas
within a process environment: sales and service, innovation, sustainability,
compliance and risk, and manufacturing operations.
Microsoft believes that no single company can meet the breadth of any given
enterprise customers needs; it has always relied on an extensive partner
network to bring innovative solutions to market. A 2007 Economist Intelligence
survey of senior executives points out the benefits of global innovation
networks in achieving greater levels of innovation, cost savings, access to
specialist skills and knowledge, faster time to market, and access to local
markets. Microsoft provides a consistent value proposition for customers so
they can leverage and add their own distinctive know-how and capabilities.
Figure 7. Members of the Microsoft partner network
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9. Conclusion
Enterprise architecture along with complementary approaches enable a value-
based holistic method to integrate business strategies, processes, and
operations. Process industry enterprises should anchor technology efforts with
enterprise architecture as they optimize operations and integrate synergistic in
organic growth channels.
Microsoft provides the right consultative approach along with extensive industry
and partner breadth to help process manufacturing companies realize greater
agility.
For more information about consulting and support solutions from Microsoft,
contact your Microsoft Services representative or visit
www.microsoft.com/services.
10. References
n Microsoft in the Process Industry- Chemicals, Pulp & Paper, Metals
Processing - May 2012
n India metal sector research SBICap securities
n Microsoft Discrete Manufacturing Reference Architecture
n Microsoft approach paper - The Cloud Unlocking new enterprise business
paradigms
n Performance across boundaries Microsoft on adapting to a connected
world in manufacturing
n Report of the Working group on Steel Industry for the 12th five year plan
(2012-2017) Ministry of Steel, Government of India
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