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
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
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.