October 27, 2000 Agent of Change

Volume 3 | Issue 7

Already in U.S. business history’s pantheon, Bethlehem Steel is taking some innovative steps to stay there.

This is the story of a company with roots deep into the industrial past of this country, and into an old, highly traditional, difficult-to-change way of doing business. It’s also the story of a company that is breaking through this traditional culture and embracing the ways of doing business in the 21st century. It’s the story of Bethlehem Steel Corporation – one of the prime movers of the Industrial Revolution, and now one of the prime agents of change in the U.S. steel industry.

And if you’re thinking that Bethlehem Steel is changing by adopting the new technology of e-business, you’re right – but there’s more to the company’s new culture than simply “click and mortar.” The company has advanced new initiatives in manufacturing, research and development, and human resources to meet the realities of the industry in the new millennium. As Gus Moffitt, the company’s executive vice president, expresses it, the company is committed to creating a high-performance organizational culture under the leadership of its new chairman and chief executive officer, Duane Dunham, and is reorienting every aspect of its business around this new culture.

“Our vision,” Moffitt explains, “is to be the premier steel company. To achieve this vision, we must be the premier production services and solutions company to our customers, and the best value-creating company for our stockholders. We are focusing on achieving Operational Excellence in our core steel business with new tools and excellent facilities to ensure cost competitiveness and profitable growth both in our core business and in new business ventures.”

E-Bethlehem

In other words, Bethlehem Steel is changing with the times, but retains the same basic vision – being the premier steel company in the United States. The company traces its roots to 1857 – with the founding of its earliest predecessor company, Saucona Iron Company of South Bethlehem, Pa.; through the formation of Bethlehem Steel in 1904; and through the 20th century, the company’s steel built, transported and defended America.

Bethlehem Steel today is the second largest fully integrated steel maker in the country. “Fully integrated” means it makes its steel with raw materials of coal to coke, then iron ore and limestone into steel. (Electric furnace steel makers use predominantly scrap steel.) The quality advantages of the fully integrated process allow Bethlehem to be a top-flight supplier to some of the world’s most demanding automotive applications. In fact, Bethlehem has earned the coveted General Motors Supplier of the Year award for five consecutive years (1994 to 1999).

As the second largest fully integrated steel company in America, Bethlehem ships about 9 million tons of steel each year, produced by about 15,000 people at Bethlehem plants in Indiana, Maryland, Pennsylvania and New York. It is primarily a flat-rolled steel producer – thin sheets for automotive and construction, and thicker pieces (called plates) for heavier construction and equipment uses. Bethlehem is also known for its premium quality rails for North American railroads, and is the largest rail maker in the country today.

History breeds tradition, and tradition sometimes resists change – but not here. Dunham’s accession to chairman and CEO on April 25, 2000, was the beginning of a new era for Bethlehem Steel – and of a renewed focus for the manufacturing, operations, sales and human resources aspects of the company. “When Duane took over, he issued a challenge to the company,” says Robert A. Rudzki, vice president of business development and e-business. “If we do things in the same way, we’ll get the same results. We need to begin growing the business in new ways.”

Two key areas that Rudzki oversees, business development and e-business, are prime vehicles to speed the company to its “new ways” of growing. “Duane made a strong statement when he put new business development and e-business together,” says Rudzki. The combined unit’s objective is to “identify and manage new growth opportunities, and to use Internet technology to enable the transformation (of Bethlehem Steel) to a production, services and solutions strategy,” according to a recent company presentation. Rudzki adds, “I see e-business as an enabler. It provides the opportunity to drive both Operational Excellence and support new business initiatives.”

The group was formed last March, and already Bethlehem Steel’s e-business activities are accelerating. A key event in advancing the e-business orientation occurred in June, when the company chose the B2B Commerce Platform™ from Ariba, Inc., a California-based e-commerce platform provider. When this platform is fully implemented, Bethlehem Steel can manage its worldwide purchases, track spending in all parts of the company, track orders and, in combination with other business tools, permit customers to track orders and integrate its entire chain “from the supplier’s supplier to the customer’s customer,” as Rudzki puts it. The company’s Web site offers visitors the opportunity to experience some of the same things customers can get (www.bethsteel.com/customers.)

Another recent development was Bethlehem’s announcement of an equity investment in OneBuild.com, an e-business company dedicated to improving the efficiency and effectiveness of buyers and sellers in the highly fragmented commercial construction marketplace. “Bethlehem has a rich history in the construction market,” notes Rudzki, “and this investment is a natural intersection of our heritage and our future.”

The Science of Improvement

Another Operational Excellence focus area is research and development. Based in three buildings near the headquarters, Bethlehem Steel’s R&D facility is the largest such steel facility in North America. The 155-member staff includes advanced-degree specialists in several different engineering disciplines, physics, chemistry, mathematics, computer science, metallurgy/materials science and biochemistry.

This facility and its equipment maintain Bethlehem Steel’s tradition of innovation. From the R&D area have come such industry standards as Galvalume™ coating, Bethlehem Steel’s licensed, patented steel coating first launched 30 years ago. The tradition continues today in this area’s work on the ultralight steel auto body (ULSAB) project, in which Bethlehem Steel is cooperating with other steel makers to develop a lightweight, fuel-efficient auto body in steel that’s competitive with both aluminum and plastics and, at the same time, more affordable. “The trend in steel, for the auto industry in particular, is in favor of lighter, thinner and stronger materials,” says Peter Cheplick, manager of planning, administration and technical services. “We are strategic partners with our customers in the development and application of our steel products.”

People Quality

“The high quality of our steel is all about the high quality of our people,” says Moffitt, and Bethlehem Steel has shown its willingness to embrace the latest human resource “technology” along with the most up-to-date technologies in production and R&D. In 1999, in partnership with The Wharton School of Business of the University of Pennsylvania, the company instituted a comprehensive leadership development program with a focus on achieving desired business results and developing high-potential employees. Bethlehem’s Six Sigma program is the linchpin of its people program.

Dr. Charles Houck, director of quality and Six Sigma, says, “In Six Sigma, emphasis is placed on careful definition of the problem, detailed analysis of all process stages and providing controls for long-lasting solutions to long-standing problems.” The Bethlehem Steel Six Sigma training program encompasses two- or four-week training sessions using actual company projects.

“Six Sigma differs from other problem-solving methodologies because of the tremendous amount of work you put in up front defining problems and the process stages,” says Houck. “Furthermore, you’re not finished with any Six Sigma project until you’ve put controls in place to maintain the improvements over time. This methodology provides the tools that make it realistic to aim for 50 to 90 percent improvements.”

Already, Bethlehem Steel has seen significant improvements from Six Sigma, even though it’s been in place for less than two years. Houck states, “We have been able to demonstrate the creditability of this methodology. Processes have been improved and the foundation is in place to improve them still further. We’ve seen benefits already on our bottom line. Our objective is to have Six Sigma represent the way we do business at Bethlehem.”

Six Sigma, R&D and e-business are the three cornerstones for Bethlehem Steel as the company attacks this new century. This time-honored driver of the Industrial Revolution remains committed to achieving this vision of premier status in the years to come.

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