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The mill sector faces slowing cyclical demand, eased only slightly by the growth of emerging markets. In addition, producers have to cope with high energy costs, volatile commodity prices and increased regulatory requirements.

Despite mergers and takeovers in recent years, the industry still suffers from overcapacity. The result of these combined
challenges is that producers need to cut costs, manage increased risk and compete for business.

If a producer fails to meet customers’ individual product specifications and quality expectations, business can move elsewhere. If manufacturers don’t meet safety or environmental rules, the government may fine them heavily. In an industry of thin margins either of these events can be devastating.

Cost control and service improvement

Conversations with our clients show that they need to achieve the difficult combination of reducing costs and improving operations to meet the requirements of their customers and regulators.

I want to use this blog post to talk a little more about the pressures facing the sector and how SAP has helped clients adapt to these imperatives.

Flexibility, asset efficiency and safety

Customers are demanding more flexibility, for instance to order small amounts of a specific product. This requires more efficient handling of the supply chain and a full view of customer relationships to maximize production and distribution efficiency.

Cemex USA installed SAP CRM and ERP applications to improve its customer relationships in a status quo industry. Improvements included 29% more customer transactions with the same headcount and increased accuracy in order entry and delivery.

High energy costs have challenged asset-usage norms. Running 24 hours a day isn’t an efficient use of expensive assets if you are paying a fortune for energy. Our clients want us to help them focus on profitability and not absolute volumes.

At Concretos Cruz Azul, SAP’s Profitability and Cost Management application boosted production efficiency to achieve 33% fewer staff involved in cost processes, a 2% reduction in unprofitable sales and an 8% increase in production efficiency.

Mill businesses expose their workers to physical risks. This in turn subjects producers to regulatory and reputational risk. Our clients know that a major safety issue could shut them down and ruin their public standing.

ArcelorMittal Brasil wanted to make sure its health and safety processes lead the industry. SAP’s environment, health and safety application cut investigation times for accident investigations by 80% and drove a 50% improvement in action plans and effectiveness of medical exam programs.

There’s no easy answer to the challenges of a volatile world but better customer relationships and greater visibility of processes are within your control.

Please let me know what you think are the developing issues for the sector and what SAP can do to help by commenting here or on Twitter at @SAPMillMining.

To learn more about how we can help you with your business challenges please have a look at SAP's Solution Explorer for the Milling Industry.