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Yankuang Chemical Uses a Combination of Lean Management Strategies to Support Corporate Development Author/Source: Yankuang Chemical Date: 2020-08-27 Clicks: 6 Entering 2020, faced with challenges such as the spread of the COVID-19 pandemic, falling international oil prices, and weak market demand, Yankuang Chemical Co., Ltd. applied lean management practices in line with its own circumstances, vigorously pursued strategies to reduce costs and increase efficiency, and implemented comprehensive cost control throughout the entire life cycle of operations. By focusing on continuous improvement, cost savings, and strict cost control, the company employed a combination of lean management tactics and cost-reduction strategies to provide strong support for the high-quality development of enterprises in the post-pandemic era. Continuous improvement brings vitality. “The greatest significance of their project is that it can be applied to other cases of localized wear and leakage; it has great potential for broader application.” ”On June 18, at the press conference on employee-driven improvements held in Conference Room 10 of Yankuang Lunan Chemical, Hu Yun, the company’s deputy general manager, spoke highly of the innovative leak-sealing project implemented in the gasification workshop. The pipeline for the circulating water in Yankuang Lunan Chemical Industry, leading up to the main valve for gasification, is located at a height of about 0.6 meters above the ground surface. To prevent corrosion, the pipelines are designed with insulation, which causes rainwater to accumulate easily in the areas near the ground. Especially after the arrival of summer, with increased rainfall, spot corrosion has appeared in some areas. To ensure the safe and stable operation of the system, the workshop decided to remove the insulation at the root area for anti-corrosion purposes. However, during the anti-corrosion process, leakage points in the form of \"sand holes\" appeared in that area. As the pressure in the circulating water main reached 0.4 Mpa, the leakage points at the site emitted a jet-like flow of fluid; if not addressed promptly, the expansion of these leakage points could lead to the shutdown of the gasification circulating water network, and even result in the shutdown of the entire system. The system cannot be stopped; the leaks must be sealed, and no time can be wasted. In the past, external contractors were hired for leak repair; however, since the Spring Festival, it has been difficult to find construction crews, and their rates have also gone up. “We’ll block it ourselves. ”Cao Liang, the technician from the gasification workshop, crouched on the ground, staring at the leak site for almost twenty minutes; then he suddenly stood up, indicating that he had come up with an idea. Half an hour later, he and the maintenance crew returned to the site, carrying two clamps made of welded iron plates. It turns out that they made pipe clamps based on the diameter of the main circulating water pipe; a positioning frame was welded in the middle of these clamps, and the sealant rod was inserted at a vertical angle into this positioning frame. By tightening the pipe clamps, the sealant rod was pressed tightly against the leak site. “The size of the positioning frame is determined based on the diffusion angle of the leak. In this way, it is possible to act quickly on the location of the leak; by utilizing the flexibility and strength of the sealant rod, the leak can be completely sealed in the shortest possible time. Moreover, in the past, hiring external contractors to fix such leaks cost around 20,000 yuan. This time, with our independently developed method for sealing leaks, aside from the cost of the sealing adhesive, the iron plates used for welding the pipe clamps were obtained from waste material stocks, which significantly reduced the costs associated with leak repair. ”At the press conference, Cao Liang’s explanation of the leak-sealing methods earned warm applause from the audience. After the pipe clamps were installed, all leaks were completely eliminated. To prevent any leakage through the gaps between the clamps, they used leak-sealing compound to fill those gaps, thereby avoiding any disruptions to production caused by leaks in the main circulating water pipe. In May, this leak-sealing method was successfully applied to a leak point in the main pipeline carrying flare fuel gas. This effectively prevented any major modifications to the fuel gas pipeline network and ensured the stability of the flare pilot light system. “The production site is the domain of front-line employees, who are most familiar with the operational processes there and how the equipment functions. Through years of practical experience in production, they know best where improvements are needed. The operational and maintenance skills they have accumulated over time provide a practical foundation for technical upgrades; therefore, it is very important to encourage these front-line employees to take initiative in making improvements. ”Hu Yun said. In 2020, guided by the principles of “lean management, self-driven improvement, and technological innovation”, Lunan Chemical actively encouraged its grassroots workshops and work teams to carry out self-improvement initiatives. In the first half of the year, over 1,032 self-improvement projects were submitted; these efforts yielded benefits worth more than 2.6 million yuan. Cash rewards totaling 56,000 yuan were distributed to employees based on the actual results achieved. These rewards range from as low as 5 yuan to as high as 200 or 300 yuan. Although the bonuses are not large, they are all paid in cash, which effectively boosts employees’ sense of achievement, increases their enthusiasm for participation, adds momentum to continuous improvement efforts, and promotes the safe, high-quality, and efficient development of the company. In addition to Lunan Chemical, Lean Management and continuous improvement efforts are also in full swing at another company under the chemical sector’s headquarters, Guohong Company. On Guohong Company’s internal website, two dedicated sections have been created: Lean Management – Lean Guohong and Continuous Improvement, which are used to publish information related to lean management and continuous improvement efforts. The company has also compiled the electronic monthly magazine \"Lean Guohong,\" in which 26 articles sharing employees’ experiences in lean management have been published, thereby fostering a strong culture of lean management and continuous improvement. As of May 2020, a total of 861 proposals for independent innovation had been submitted by various workshops. Upon implementation, these projects led to further reductions in resource consumption through optimized operations, resulting in cost savings and efficiency gains worth 5.33 million yuan. “As we continue to advance lean management, we encourage employees to proactively identify problems and pursue continuous improvement. It is a continuous cycle that moves forward, and it also promotes continuous improvement in work. ”Liu Qiang, deputy general manager of the chemical company, said. Targeted measures to reduce costs: For chemical enterprises, coal accounts for 60–65% of their total costs. In 2020, the group company set a target for the chemical company to reduce the cost per ton of coal used in the furnace by 50 yuan. The sudden outbreak of the epidemic after the Spring Festival prevented many coal mines from resuming operations normally, resulting in persistently high coal prices. Chemical companies have done their best to achieve cost reduction goals. “We remain steadfast in upholding the philosophy of \"large-scale mines, long-term contracts, rail transportation, and direct supply.\" Our procurement goal is to achieve high quality at competitive prices, thereby meeting the needs of production units to the greatest extent possible. To ensure coal quality, strict controls are implemented at every stage—from the mining site to its entry into the plant and furnace—thereby enabling comprehensive management of the entire coal processing process. ”Yang Shumi, Secretary of the Party General Branch, Executive Director, and General Manager of the Coalification Supply and Marketing Company, explained to the reporters. After the Spring Festival, a sudden outbreak of the epidemic occurred, causing the resumption of coal mine operations to be postponed multiple times. As a result, coal procurement efforts immediately became strained. To this end, the Coal Chemical Supply and Marketing Company activated its wartime mechanism. Through continuous communication and coordination, they successfully finalized the signing of the long-term coal contract on February 1. Immediately afterwards, efforts were made without pause to coordinate the early supply of coal. Due to the outbreak of the pandemic, purchasing officers were unable to enter the mine sites for negotiations, so they conducted discussions with the other party from outside the mine gates. Finally, on February 18, the coal mine agreed to supply coal ahead of schedule. The next day, the procurement team promptly completed the processes related to credit approval and advance payments. The loading of the train was completed on the afternoon of the 24th; it set off on the 25th and arrived at Guanqiao Station successfully on the 27th, where it was weighed and taken into the factory that same night. Through continuous operation, a dedicated coal conveyor line from the mining site to Lunan Chemical was successfully established. During this period, Wang Yufeng, the head of the Procurement Department at the Supply and Marketing Company, did not take a single day off, constantly working on the front lines of procurement and transportation. Currently, this coal type is used as the primary coal source for Lunan Chemical, ensuring the stable operation of the boiler system. Guohong Company, which also uses coal as its “raw material,” has implemented targeted measures in cost control, achieving excellent results in reducing costs and improving efficiency. “More than 60–70% of the cost of our products is attributable to coal costs; therefore, reducing the cost of coal used in production is of utmost importance. This has always been a key task we prioritize and oversee. ”said Su Wan, deputy general manager of Guohong Company. Having food to eat is a prerequisite for reducing costs, while eating high-quality food ensures high yields. In February 2020, when the epidemic situation was at its most severe in China, Guohong Company did not wait or rely on others, but focused all its efforts on taking action ahead of schedule. Local refined coal offers low prices and high gas generation capacity, making it the most cost-effective option for reducing costs. Ensuring a stable supply and lowering the purchase price is key to sourcing local refined coal. They have taken multiple measures: while actively conducting customer visits to retain existing clients, they are also making great efforts to develop new mining sites and introduce a competitive mechanism for local coal ； In addition, by making large-scale purchases of local coal and supplementing it with coal from the western regions as needed, it was possible to ensure that the costs associated with coal procurement remained under control. Since 2020, Guohong Company has seen six consecutive decreases in coal procurement prices. Currently, the cost of coal used in its furnaces has dropped by 15% year-on-year. To ensure the quality of the coal, they installed GPS tracking systems in each logistics vehicle, and connected the monitoring signals to the surveillance room of Guohong Company’s armed security department. Once the coal was dispatched, its movement was under continuous tracking and monitoring, allowing for the retrieval of information regarding the vehicle’s route and speed at any time. In addition, they also randomly assign staff to accompany the vehicles for transportation and to monitor their operation. Upon the arrival of coal at the plant, sampling personnel wear video recorders throughout the process, recording the sampling locations and the sampling procedure in detail. Video surveillance is also implemented during the coal analysis process, ensuring comprehensive and thorough oversight to guarantee the highest possible quality of the coal that enters the plant. “With the coal quality ensured, through operational experience we have determined the optimal slurry concentration ratio that guarantees the best system performance and highest output; we focus on this value. By continuously optimizing the proportion of coal fed into the furnace and testing new additives, the slurry concentration has been maintained above the optimal level, thereby increasing production capacity. ”Chen Aizhong, Party Secretary and Executive Chairman of Guohong Company, said. With sufficient supply, low procurement prices, and precise blending ratios for feeding into the furnace, Guohong Company advances step by step through its series of interconnected actions. Since the beginning of this year, the company’s methanol production has reached 1,850 tons when two reactors are in operation, and over 2,300 tons when three reactors are in use. This represents an increase of 100 tons per day compared to previous levels, while consumption has decreased accordingly; the annual economic benefit resulting from this is more than 10 million yuan. Closed-loop management drives lean operations. On June 25, Wang Liying, a warehouse keeper at Guohong Company, recorded in the ledger that the pump shaft for the feed pump in the clarification tank of the gasification workshop had been received, noting \"Record the receipt of the new one and the handover of the old one.\" After Ni Qingliang, the equipment technician in the gasification workshop, signed, he still reminded him, \"Don’t forget to return the old pump shaft after the maintenance, so that the account can be closed.\" ”“Don’t worry, it will be returned on time; we also want to earn the company’s bonus. ”Niu Qingliang didn’t forget to make an OK sign with his fingers. On May 20, 2020, Guohong Company formulated and implemented the \"Management Measures for the Handover of Old and Receipt of New Materials,\" establishing specialized forms for confirming the handover and receipt of materials as well as work logs, in order to standardize the scope of work and the implementation procedures. It was stipulated that when it is necessary to replace various tangible materials that are not consumable during the production process, the original used materials must be returned before new materials can be received. The steel materials used for the carbon dioxide technology upgrade project are the first items to be recorded in the ledger. During the carbon dioxide improvement work carried out in the synthesis workshop on May 12, 0.31 tons of stainless steel pipes were required according to the improvement plan; however, no such materials were available in the old material warehouse and could not be delivered. In response to this situation, the workshop submitted a material requisition form, which had to be signed and approved by the Mechanical and Electrical Management Department as well as the Production Technology Department before the warehouse could release the materials. “You see, we keep a clear record of the time and quantity of every shipment of goods that comes in or goes out. When were the old materials brought in, what is their quantity, and where are they stored? ； It’s clear at a glance when new supplies will be available and whether the shipment confirmation is compliant. At present, all departments within the company and all materials are subject to the process of handing in old items in exchange for new ones, **which has improved the previous lax approach to material allocation management. ”Wang Liying said to the reporter while flipping through the records. “In particular, old materials are stored separately; for those with repair value, we reuse them by restoring them. ” The implementation of the process for replacing old materials with new ones involves unified management and disposal of the waste materials that are eliminated and replaced during production; it is an important part of implementing full-life-cycle management of materials. At Guohong Company, steel products, pipe fittings, valves, cables, electrical instruments, rubber products, equipment, spare parts for equipment, oils, catalysts, and other items are all categorized as materials subject to the “return old items to obtain new ones” policy. This will effectively reduce material inventory levels and consumption, prevent loss and waste, while also promoting the reuse of old items. The strict implementation of this system is of great significance for strengthening the cost-saving awareness among employees, achieving efficient management of material procurement, and improving the economic efficiency of the enterprise. Controlling the issuance and return of materials is a crucial aspect; turning the returned waste materials back into useful resources requires the collective wisdom of everyone involved. As a coal chemical engineering company dedicated to logistics, repairing equipment and replacing parts is part of its regular work, and there is great potential for improvement in this area. They focus their efforts to reuse and repair not only large equipment, but also small electric hoists and even maintenance gloves. During the maintenance work at the Yulin methanol plant, the condensate heat exchanger in Phase 1 of the synthesis process had to be discarded due to too many leakage points in its tubes. The welders’ team from the Coal Chemical Engineering Company’s project department at the Yulin methanol plant found an expander rear cooler in the storage area for old equipment, added 5 elbows and 2 valves, reinstalled 3 meters of piping, and reinforced the equipment foundation using steel plates and angle iron. After applying anti-corrosion measures, a brand new heat exchanger was created, which passed the testing procedures and was put into operation successfully, saving more than 100,000 yuan in costs that would have been required to replace it with new equipment. Repairing used items generates additional income, while the rational reuse of materials improves efficiency. “Focusing on the major aspects while not neglecting the minor ones is our principle of making use of what’s already available. ”Zhang Weihua, Secretary of the Party Committee, Executive Director, and General Manager of the Coalification Engineering Company, said with a smile. Li Yongfeng, who works at the Guohong Chemicals project team for this company, is a crane operator; thanks to years of experience in studying and working in this field, he has a thorough understanding of the principles and structure of lifting equipment. It was a shame to see the electric hoists withdrawn from the project department included on the scrap list, so he disassembled the old hoists, selected the usable components, and reassembled them to bring these scrapped machines back to life and get them working again. Protective gloves are consumable items for the gasket-making team in the component manufacturing branch; especially when there is a heavy production workload, the standard of two pairs per month is simply not enough. In such situations, Sun Desheng from the team manages to provide support for everyone, as if by magic. It turns out that these were all collected by him daily from the worn-out gloves discarded by his colleagues. If one glove gets worn out, people tend to throw away the other one as well. Sun Desheng, however, saves the glove that isn’t completely worn out; once he has enough of them, he cleans them thoroughly, matches them up carefully, and makes them available for use again. “Gloves aren’t very valuable, but they serve as protection for the hands; without them, one simply can’t work in critical situations. I have them ready for everyone, so production won’t be delayed due to broken gloves. ”Sun Desheng’s words are as simple as he is. Turn crises into new opportunities and create new prospects amid changes. Although the sudden outbreak of COVID-19 after the New Year and the sharp drop in international oil prices posed unprecedented challenges to the chemical industry, Yankuang Chemical Company did not wait or rely on others; it promptly introduced countermeasures, planned its operations in advance, strengthened lean management, and made efforts to reduce costs. Despite the fact that 90% of companies in this industry were suffering losses, the company managed to achieve a profit of 128 million yuan in May and June, taking solid steps forward despite the difficult circumstances.