Salzgitter Flachstahl minimizes inventory costs

26.08.2021 | Salzgitter Flachstahl GmbH

[Translate to Englisch:] Foto eines Coillagers

A total of almost 4 million tons of crude steel per year: Salzgitter Flachstahl, as the largest steel subsidiary in the Salzgitter Group, produces hot-rolled strip, strip steel, cold-rolled sheet, and surface-finished products, as well as slabs for Group companies in the integrated steelworks. Up to the year 2012, the company conducted complete, full inventories for its finished and unfinished products - an unimaginable effort and a major challenge, especially since the steel mill is in continuous manufacturing operations around the clock, 365 days a year. Following approval by the auditors, Salzgitter Flachstahl replaced the full inventory with the Remira Statcontrol inventory sampling system in 2012 – and with great success.

Prior to the introduction of inventory sampling, a total of 7 full inventories were required each year to record the products of several hundred thousand tons amounting to a larger triple-digit sum (IFRS balance sheet value) and involving many tens of thousands of individual items. Ingo Gunkel, who has been active in controlling at Salzgitter Flachstahl for some 30 years, was jointly responsible for the changeover to the extrapolation method of the Remira Statcontrol inventory sampling software. "The previous inventories involved an incredibly high expenditure of personnel and time, and in addition, restrictions in production were possible," as Gunkel explained. After an initial preparation period, the auditors greenlighted the inventory sampling.

Stringent demands due to continuous operation

Salzgitter Flachstahl relies on state-of-the-art production technologies for steel production and further processing to manufacture high-quality steel products. Continuous operation represents a special feature here, meaning that basically, interruptions for counting are not possible. The entire production chain, from basic metallurgy to surface-finished sheet, takes place in the fully integrated steel mill. "On the procurement side, we have significant demand for raw materials, essentially coking coal, ores, blast furnace coke and scrap. The highly volatile procurement prices present additional challenges. On the sales side, we have to supply our customers just in time, and therefore we always have large volumes of raw materials and products in stock," as Ingo Gunkel outlined, describing the situation in the company.

Seamless connection to the SAP system

Inventory sampling with Remira Statcontrol draws on legally permissible and audited statistical procedures to reduce full inventories through safer and at the same time more cost-effective sampling procedures. The software has been independently certified by auditors in Germany, Austria and Switzerland and is approved in these countries as an alternative to full inventories. High inventory quality as well as a reliable stock accounting are prerequisites for its deployment. Statcontrol convinced the responsible company officers given the convenient, easy handling and the fact that the counting input for products was reduced to a minimum. Seven full inventories were turned into four random samples of 30 pieces each, and production restrictions have been entirely avoided since then. Ingo Gunkel sees two major advantages in particular: The extreme time savings as well as significantly lower effort and input. What’s more, the documentation and preparation of the inventory data is also far more detailed from now on, and the items to be recorded are photographed, among other things. "In future, there may even be no need for on-site visual inspection and photography. In the meantime, most storage locations have been visualized and can be viewed via warehouse management systems," explains Gunkel.

High levels of inventory reliability

The inventory security at Salzgitter Flachstahl in SAP/ERP now stands at 100%. Deviations or differences are not possible, as no inventory difference postings are permitted in the company. Individual items are tracked with the help of material tracking systems and warehouse management systems. Communication to the overarching SAP/ERP installation takes place with interfaces in real time. "As steel industry company, we have a high annual maintenance expenditure. This includes an intensive inventory of spare parts and special reserve parts. In the past, we carried out inventory sampling with SAP/ERP Standard every three years. Since 2016, we have also obtained he approval of our auditors for random sampling with Statcontrol for these warehouses," as Gunkel stated, who is decidedly satisfied with the many years of successful cooperation with Remira Statcontrol. Thanks to the continuous further development of the inventory in the organization and technology areas, Salzgitter Flachstahl will certainly be able to record further savings in the future.