Steel industry and cost control...

  Steel industry and cost control  The cost control process in a steel plant is a multivariate system which is subjected to a large number of inter- influencing variables affecting the cost performance of the steel plant. It is necessary to isolate the inter influence of the variables to understand the role played by the each variable on the cost performance of the steel plant. Major variables affecting the cost performance of a steel plant are discussed below. Productivity – It is the specific rate of production. Higher is the productivity of the units of a steel plant, lower will be the cost of production. Higher productivity results in better utilization of plant and machinery. Production – Production is the physical output from a unit. For good cost control, it is necessary that each unit of the steel plant should run to its maximum capacity. When production from a unit is lower than its capacity then there is an increase in the specific consumption levels. Also when any unit is underutilized then it will result into higher fixed cost (over heads, depreciation, interest etc.) per unit output. Further It is needed that the capacity of each succeeding unit should match with the preceding unit so that there is no under utilization of any unit. Raw materials – In the present day scenario, raw materials contribute to major cost of production. Hence specific consumption of the raw material should not be more than what is required by the technology employed. Any wastage of raw materials and their deterioration during storage should be totally avoided. Further raw material quality plays very important role in cost control. Lower quality raw materials though cheaper per ton results into higher consumption of not only of its own but also of other raw...