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| As examined in Chapter 2, profitability depends on value being created at a level that is higher than the cost to create it. Costs abound, but many result from the use of resources in production processes. Improving productivity of those resources improves profitability. Productivity of specific resources become more important as the resources require greater investment. For a very capital intensive business, like a steel mill, generation of a financial return on equipment resources is critical for success. The ability to maximize utilization and efficiency of these resources is synonymous with maximizing ROA. Nucor Steel's Crawfordsville Plan has invested in technological resources that enables it to increase the return on other resources. | VIDEONu1 |
| Nucor's ability to maximize equipment productivity also increases their labor productivity, since labor is so tightly tied to equipment use. Productivity levels that are higher than those of competitor's provide competitive advantages. Customers don't specifically care about the productivity levels, but they do care about what those productivity levels can to for them--namely lower prices and higher volumes. | VIDEONu2 |
| Since worker productivity and equipment productivity are so closely linked in processes, Nucor ties equipment productivity to the measure of worker performance. The use of teams and incentives provide motivation for employees to maximize machine output, but only quality output counts. | VIDEONu3 |
| The system used by Nucor to integrate decision-making is known as computer integrated manufacturing (CIM). Nucor's CIM system links equipment setup, process controls, and the business information system (marketing & sales, production planning, and financial administration) together. The result is a tight coordination between the actual production of steel orders to marketing and financial decision-making. Orders are tracked through the entire system, giving workers specific instructions on processes. This prevents the production of defective product and minimizes the potential for time to be wasted on valuable equipment. | VIDEONu4 |
| Nucor's CIM system provides tight coordination between production, inventory control, shipping and even payment collection. Once the order is entered into the system, information is gathered and made available to production. As production begins completing the order, that information is fed back to the system so that the inventory associated with the order can be followed through completion. Tracking continues through shipping, creating an invoice when the order is actually shipped. That order is tracked, along with the receivable created, until Nucor receives payment for the order. | VIDEONu5 |