Product Mix Optimization for a Steel Pipe Manufacturer with Circuit Level Energy Monitoring
October 5, 2019
A steel pipe manufacturing plant, one of Oorjaa’s clients, has been using an avg. energy cost for all pipes it made – assuming that the energy cost per kg (energy intensity) of any pipe is a constant. Moreover, with the utility electric bill coming at the end of the month, there was no way to determine the breakout of energy costs by pipe or by batch.
With the implementation of the CircuitMeter electrical sub-metering solution by Oorjaa, the client now gets the kWhs consumed at each batch. The plant managers record the daily production output by size and quantity (in kgs). With Oorjaa’s assistance, the client matched the energy costs by each batch to the specific product.
Result: There was a wide range of energy intensities (kWh/kg) for pipes and thus costs. The analysis helped the client make the following strategic product mix decisions:
· Increase production of pipes with lower energy intensity (assuming price is constant, lower cost per unit improves margins)
· Adjust the pricing for higher energy intensity pipes – i.e. improve margin by increasing price
· Advise plant operator to analyze root causes for high energy intensity and adjust manufacturing
· Discontinue pipes with highest energy intensity