Mining Data To Win

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M E T A L S/N A T U R A L R E S O U R C E S
Mining Data To Win

Natural resources companies use technology to stand out in the marketplace

By Jon Pepper
Issue date: Sept. 18,1995

nyone who's ever heard the song "It's A Small World" can identify with technology managers in the metals, minerals, and natural resources industry. They're in daily contact with copper mines in Chile, aluminum projects in China, and other raw-materials operations around the world.

"The most significant trend we see is the globalization of the marketplace," says George Hughes, an associate principal with the EDS Management Consulting services industry practice in Cambridge, Mass. Metals, minerals, and natural resources companies "are in a global commodity market, and they are all looking for ways to use information to differentiate themselves," he adds.

According to Hughes, metals companies "are trying to get more out of end-user data and other information that helps them in product creation of other portions of the manufacturing cycle."

International Paper Co. is involved in more global information technology activity now than it has in the last 10 years combined, says Carl Moore, the Purchase, N.Y., company's chief information officer. A major theme at the company, he adds, is high-performance work teams. "They require a new network to allow us to communicate from desktop to desktop anywhere in the company,'' he explains. "Our goal is to give all our employees the information they need to run the business in a timely manner and move that information down to the production level."

International Paper has made more than 30 acquisitions worldwide since 1987, Moore notes, and sales should exceed $17 billion this year, compared with $4.5 billion in 1985. The papermaker is reengineering all of its financial processes, upgrading its corporate network, and redoing costing systems for its 24 U.S. paper mills.

International Paper recently purchased a global financial system from SAP AG to help it manage, report, and execute business around the world.

But even with this activity and sales increase, Moore is working with an IT budget of about $110 million--less than it was in 1989. "Our chairman has challenged us to maintain flat budgets by increasing productivity," says Moore, "and the only way we can do that is to work smarter." One plus for the IT operation: Various projects under way are in excess of $200 million and are not included in the annual budget.

Maxxam Inc. in Houston, the majority owner of Kaiser Aluminum, also is becoming much more international in its operations and IT perspective. "The company has lots of people on technology projects in Asia, Russia, the former Soviet bloc, and India," says David Geary, the company's director of systems.

Maxxam has had to ensure that its electronic-mail systems could handle its current level of activity and accommodate growth. "We have people from all over the world sending messages and files on a 24-hour-a-day, seven-day-a-week basis," Geary says.

Because Kaiser is a holding company, Geary doesn't have any big computing centers to take care of these network needs. Instead, he says, "the bulk of our E-mail traffic is on a dial-up basis because of the nature of our facilities. Our network is really a short volume of online or batch transfers and then a disconnect." Another big trend, says Geary, is a move toward decentralized c omputing, with an evolution toward PC environments. "We don't want to carry high facility costs," explains Geary, citing the cyclical nature of the metals business. "We can get into enormous troughs and often [have] great peaks."

Facing an annual IT budget of $15 million to $30 million and hundreds of IS employees, Geary says another goal is trying not to overspend: "We know our business will cycle down for information systems, so maintaining the environment on a continuing basis is a significant part of our spending."

Another challenge is the search for better manufacturing software. "It's difficult to find a package that works the way we need," says Geary. "I think [the software for our industry is] far below the standard of software for banks, insurance companies, and other kinds of industries."

Charlie Bell, VP of information systems at Jefferson Smurfit Corp., a $4.6 billion paper products company in Clayton, Mo., says he's focused on using IT to deliver customer service. "My primary objectiv e is serving our customers," says Bell.

This means offering improved communications on product shipments, delivery, and design. Jefferson Smurfit uses videoconferencing, electronic data interchange (EDI), E-mail, and other initiatives so customers can, for example, work interactively on designs and data sheets. "There is a lot we can do in areas like transmitting color separations, CAD/CAM designs, and other materials between our customers and ourselves," says Bell. "The IS executives of the future have to understand that they are customers not so much of the internal people but of the external people."

Still, Bell has to make do with slimmer margins than those available in other business sectors. For instance, while the auto industry spends about 3% to 4% of sales on computerization, Jefferson Smurfit "spends about eight-tenths of a percent on IT. Even steel spends 1.5%," says Bell. "Getting the most technology for the money is a special challenge for us."

With an annual IT budget of roughly $13 million, Bell tries to stretch every dollar through heavy application of standards and strong support from upper management. PC and software purchases are standardized companywide, and Jefferson Smurfit uses only two major vendors, IBM and AT&T. This helps cut costs not only through purchase agreements, but also by keeping support staffing to a minimum. "I may pay a bit more on the capital side," says Bell, "but my ongoing costs are the lowest in the industry."

Power To The People
Cam Henderson, manager of corporate IS at Willamette Industries Inc. in Portland, Ore., says getting computing power closer to the source is key. His company, very centralized in the past, now is careful to put only administrative systems at the regional or corporate level.

Though Henderson sees other companies following the trend of installing various systems in their plants, he thinks Willamette's approach is unique. "We have a competitive advantage by using a combination of regional and decentralized compu ting," he says.

Upgrading systems and putting power in the hands of those who need it are also key for Bernie Campbell, VP of corporate IS at Sunoco Products Co. in Hartsville, S.C. Campbell says the most important move under way at Sunoco is the transition from mainframe legacy systems to Unix and client-server platforms throughout the company. "This provides us with more functionality where we need it," he says. "You really can't buy any mainframe applications anymore."

Campbell agrees that globalization is a concern, but he doesn't see that coming into play at Sunoco for at least a year. A standard architecture for communications and applications development will allow the company to work effectively worldwide. "This will be necessary in order for us to compete globally," he says.

Like Bell at Jefferson Smurfit, Campbell sees customer service as a continuing challenge. For Sunoco, this means lots of communication with customers and even co-location at some strategic customer sites. "We often h ave our own plants in place at their sites and pass information back and forth on forecasts and inventory and other matters," Campbell says. "Our customers are very happy with this type of information."

Winning With Service
For EDS' Hughes, the new levels of customer service provide an important distinction in an industry where cost of production is a given. "You have to be a low-cost producer," he says. "Once that's achieved, there are always new levels of service that can keep customers buying from you in downturns."

The most successful metals companies will be those that find a way to effectively juggle customer service, business cycles, and the application of technology around the globe. For technology managers in the industry, this means an expanding array of challenges. "CIOs really need to know more and more about cross-functional areas," says Hughes.

While you may not catch many CIOs humming "It's A Small World," you can bet they all know the words.

(To view the Metals/Natural Resources chart in PDF format click here)

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