Ferrochrome Smelting
The MacAlloy Corporation

The MacAlloy Corporation was a producer of ferrochrome for the steel industry. In operation since 1943, MacAlloy produced over 300,000 tons of ferrochrome from ores purchased from locations as diverse as Russia, Turkey, Finland, and Zimbabwe. The electric arc furnaces used to produce the ferrochrome involved a number of unique maintenance problems and costs, because of the high-temperature environments in the furnaces. The pressure rings used to hold the electrical contacts against the carbon electrodes presented one such problem. At a cost of about $37,000 each to replace, and with repair requiring furnace downtimes on the order of 16 hours involving opportunity costs of approximately $50 per minute, some rational method needed to be developed to make the repair/replace decision.

IMS Quantum developed an Integrated Decision Model that showed the relationships between the value of ferrochrome production, repair costs, opportunity costs, opportunities for multitasking during scheduled versus unscheduled shutdowns, the probabilities associated with different scenarios, and the expected value of a particular decision. This model was used to support decisions concerning the optimal time to replace a given pressure ring, and the risks and potential costs associated with repairing an older ring. It was shown, for example, that the decision to replace a ring during a shut-down planned for another purpose was rational, even though the ring had not served it normal planned life, since the opportunity costs associated with the replacement were effectively zero.

A further benefit of the model was to show the importance of opportunity costs associated with the duration of shutdowns. A 16-hour shutdown could represent a loss of production value of as much as $50,000 (revenue minus variable costs). As a result, an effort was made to reduce the time of a maintenance shutdown. Gantt charts were prepared of a typical shutdown, and meetings were held to determine ways in which specific tasks could be made more efficient. The next shutdown was reduced to 12 hours with theoretical savings of $12,500.

The development and use of an Integrated Decision Model gave a clear picture of the factors that were most important in influencing the costs and benefits associated with different decisions. Because model development involved a broad participation among personnel, there was a greater awareness of the importance of these various factors. When improvements were sought, many people were prepared to participate in the improvement process. The use of Gantt charts is just one of many methods that can be used to effect changes indicated by the use of an Integrated Decision Model.

  Created By Leep Sites 2004 2004 IMS Quantum Corp.