Managing in a Global Economy: SeverStal

Creating a Top-Flight IT Infrastructure

by David A. Kelly, February 2008
Russia's SeverStal is working to redefine global steelmaking. In the next three years, SeverStal North America (SNA) expects to invest US$1 billion in modernizing its steel facilities in Dearborn, Michigan. It's a critical part of a globalization and investment plan that will help SeverStal emerge as a world-leading steel producer. SNA wants to leverage best practices and technologies across its global operations and improve efficiencies by locating mills closer to key automotive customers. Such plans call for a flexible IT infrastructure that can address changing global business requirements. To meet its goals, in 2007 the company standardized on Oracle E-Business Suite 12. Further plans call for SNA to deploy several Oracle E-Business Suite applications, including Oracle Financials, Oracle Purchasing, and Oracle Manufacturing, by July 2008.

Although savvy business leaders know that companies in rapidly developing economies are finding gold in everything from software to textiles, it's surprising to learn that one emerging giant has found a golden opportunity in America's heartland—in steelmaking.

Unlike some traditional U.S. firms that have fled the capital-intensive steel production market, Russia's SeverStal is an emerging giant that's out to redefine global steelmaking. And it's doing it in the heartland of American manufacturing. Over the next three years, SeverStal North America (SNA) expects to invest US$1 billion in modernizing its steel facilities in Dearborn, Michigan, which were originally part of Henry Ford's massive River Rouge manufacturing complex. It's an integral part of an investment and globalization strategy that is catapulting SeverStal, with more than 100,000 employees worldwide and more than US$12 billion in revenues in 2006, to the forefront of best-in-class steel producers.

"Our strategy is to create a global production platform that can supply high-quality steel to customers, wherever they are located," says Sergei Kuznetsov, CFO of SNA. "Most of our customers have operations in various parts of the world," he adds. "They want us to supply them with the same quality steel in Europe, North America, and Russia."

Steel production is a capital-intensive business, and SNA takes a strategic approach to managing its global assets, balancing long-term investment opportunities over a 10-year window while constantly updating its plans and assets to respond to changing market needs.

"As the world becomes more global and dynamic, our investments in production assets in the U.S. and other developed markets will eventually pay off, especially after we see the full impact of our investments in plant modernization," says Kuznetsov.

A key focus for SNA is to leverage best practices and technologies across its global operations and improve efficiencies by locating mills closer to key automotive customers.

"Our acquisition of Rouge Steel Company marked the global positioning of SNA as an automotive supplier and put us right in the center of the automotive industry in Detroit, where we can get access to the latest industry products and technologies," says Kuznetsov. "Once these customers come to Russia with steel stamping facilities, we can supply them with the same high-quality steel they use in the U.S."

 

Setting a Goal of Integration

Meeting the needs of key automotive customers requires a top-flight IT infrastructure that's agile enough to address changing global business requirements and flexible enough to enable efficient growth. Like that of many companies, SNA's existing IT infrastructure is a conglomeration of different systems: Oracle's PeopleSoft Enterprise, for financials; Indus Enterprise MPAC, for purchasing and maintenance; and a variety of custom systems.

 

"Our existing systems are all silos and are typically focused on individual functional areas," says Kevin Myers, CIO of SNA. "There's no integration, and it creates a real challenge in getting the appropriate information to the business so it can make the right decisions."

After SNA considered the option of upgrading its existing applications, many of which were several releases behind current versions, it quickly became apparent that it would be faster, cheaper, and more effective for the company to select an integrated suite of applications. As a result, in 2007, the company standardized on Oracle E-Business Suite 12. Working with BearingPoint and Perot Systems, SNA expects to have several Oracle E-Business Suite applications—Oracle Financials, Oracle Purchasing, Oracle Enterprise Asset Management, and Oracle Manufacturing—deployed by July 2008, followed by Oracle Order Management.

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