UNIVERSITY OF JOHANESBURG GROUP WORK: OPERATIONS MANAGEMENT
STUDENT NAME STUDENT NUMBER
YEAMULLE T 225259888
MATHEBULA NT 221000220
Impact of Operations Management on ArcelorMittal and South African businesses:
Introduction:
What is operations Management? How does operations management impact of new
technologies in steel manufacturing, new supply arrangements and the recent focus on
sustainability negatively or positively. In this essay paper we will be discussing these topics
and answer these questions. We will also be speaking about ArcelorMittal, a steel
manufacturer based in Gauteng. “ArcelorMittal is the leader in all major global markets,
including automotive, construction, household appliances and packaging, with leading R&D
and technology, as well as sizeable captive supplies of raw materials and outstanding
distribution network”. They are based in over 60 countries. We will discuss their opportunities
with new technology, as well as managing their external operations factors such as their
Environmental, Technological and Social. This paper will give you a better understanding of
ArcelorMittal and what they do.
What is operations management? Operations management focuses on how businesses
produce goods and services while meeting customer needs and expectations. The core
areas of operations management cover activities such as planning, directing, coordinating,
executing, monitoring, and controlling processes to ensure efficiency. Everything that you do
in a business includes action in Operations management and it is very important for the way
the business operates and does its business. Operations management (OM) is the practice
of planning, organizing, and overseeing business processes to maximize efficiency and
create value. It involves managing resources, such as labour, equipment, and raw materials,
to produce goods and services. The goal of OM is to ensure that finished goods or services
are delivered on time and in full, meeting customer needs. “Operations management (OM)
refers to the process of designing, planning, executing, and controlling the production of
goods and services, along with managing the supply chain, inventory, and quality control.”
(Pace, 2023).
Why is operations management important? “Operations management plays a vital role in
shaping an organization. By keeping a keen eye on production levels, quality control, and
customer satisfaction, operations managers can create a reputation for excellence” (Pace,
2023). With this knowledge we can see that operations management pays attention to detail
and gives confidence to the employees and stakeholders of the business. Operations
management is important in a business organisation because it helps effectively manage,
control and supervise goods, services and people. Operations Management is essential.
“Operations management is crucial for businesses because it ensures smooth and efficient
processes, leading to enhanced quality, reduced costs, and increased customer
satisfaction. It's the backbone of a company's ability to deliver products or services
effectively and efficiently.”
“Operations Managers are at the forefront of embracing technological innovations that
enhance efficiency, sustainability, and competitive advantage.” (Lyceum, 2024).
Shoprite
“Shoprite, Africa’s largest supermarket retailer, has embraced technology by implementing a
highly efficient supply chain management system, leveraging IoT and AI to optimise
inventory levels and reduce waste — setting a benchmark in the Retail industry.” (Lyceum,
2024).
Sasol
“Sasol, a global integrated chemicals and energy company, has incorporated advanced
robotics and AI in its operations to streamline production processes, enhance safety, and
reduce environmental impact; their adoption of technology has positioned them as a leader
in the Energy sector.” (Lyceum, 2024).
Using these two massive south African companies we can see the importance of Operations
management. It is necessary to develop continuously and to always be able to change for
the better because it is best for you to develop with the world and not to be left behind. It is
of high importance if you do not want to become obsolete in the world of business which is
very easy to do. An example of this is Blockbuster once a massive way for people to get new
movies to watch and to see the new on demand films that have just left cinema. They failed
to develop technologically and got swamped by competition with streaming sites like Netflix
and Showmax.
Another example of a company failing to develop of innovate themselves with new times is
Blackberry. Blackberry were once very popular, and everyone knew someone with a
blackberry. But as time passed, they failed to innovate themselves with brands like Apple
and Samsung who started developing with touchscreen phones. They were left behind
because they did not innovate their design, and this is how they lost their customer base.
They needed to be innovating consistently but they didn’t and ended up losing their brand
name in the current day. They are the memory of yesterday not the story of tomorrow.
Benefits of Operations Management? Operations managements helps manage and
control Product Quality, Productivity, Customer Satisfaction, and Reduced operating cost.
Operations help to control the product quality and reliability so that there are no issues and
that the business can work efficiently and so that there are less to no product issues in the
business. Operations Management also help promote good employee productivity and this
helps the business be more effective and efficient. Good Operations management will
increase customer satisfaction because the business will be running more smoothly due to
the business having good processes and methods so that the business can run at its optimal
level. Furthermore, a good set of operations management will promote reduced operating
costs because through productivity, quality products and customer satisfaction, cost incurred
on product servicing is maximally reduced. This simultaneously leads to increased revenue.
Only operations management can make this possible.
As spoken about above in the sub heading of “Why is Operations management important?”
we spoke about how companies failed to innovate because they did not have a good
operations management and failed to grow themselves due to complacency, but they could
have grown if they had the right operations management. Having the right operations
management can help enhancing efficiency, reducing costs, increasing profitability, and
improving customer satisfaction. This can help make your business be most susceptible to
growth and obsolescence.
External Factors of Operations Management:
The General External factors for Operations management are PESTEL which stands for
Political, Environmental, Social, Technological, Economic and Legal. We will be furthering
our discussion of PESTEL and how it impacts operations management.
Political: Examples of Political External Factors in Operations management include
Government Policies, regulations, political stability and trade agreements. The changes in
any of the previously mentions can impact operations management because changes in
Regulations can affect production costs and this impacts the product or service actual cost.
Economic: Some economic factors include, economic growth, inflation, interest rates,
exchange rates and consumer spending. Economic downturns can lead to decreased
demand, while inflation can raise production costs. Increased production cost is a negative
to the business and operations of the business as the business costs increase bringing more
product or service costs.
Social: Some Social factors include, demographic trends, cultural values, consumer
attitudes, and lifestyle changes. Changes in demographics (e.g., aging population) or cultural
preferences can affect product demand and marketing strategies. These factors can be both
positive and negative.
Technology: Some technological factors include technological advancements, automation,
new materials, and communication technologies. Technological advancements can lead to
new production methods, increased efficiency, and new product offerings. Continuous
growth in technology is positive for any business and the operations because it helps future
proof the business operations and can help lower the costs of production and business costs
and operations. The adoption of automation could reduce labour costs and increase
production speed.
Environmental: Some Environmental factors include, Natural resources, environmental
regulations, climate change, and pollution. Environmental concerns can lead to increased
costs for waste disposal, raw material procurement, and adaptation to climate change. Good
Environmental stability can increase business image and operational stability with
environmental stability.
Legal: Some Legal factors include changes in Labor laws, product safety regulations,
environmental laws, and intellectual property laws. Legal changes can affect production
processes, hiring practices, and product design can impact the operations negatively
dependent on the type of legal changes.
Operations in South Africa:
At Shoprite their “Operational and supply chain efficiency play a critical role in ensuring our
products remain affordable and accessible, while, at the same time, reducing our
environmental impact” (Shoprite, 2024). Their operational management method for Supply
Chain is to improve efficiencies, enabling business growth, minimising waste, mitigating risk,
and advancing their overall centralisation levels. By expanding, adapting, and securing their
supply chain, they continue to enhance its resilience and agility to serve their customers’
growing needs.
Operations in South Africa has unique challenges such as Loadshedding which impacts
every business in different ways. This forces businesses to invest in alternative energy
sources or methods to keep their business running during the scheduled load shedding
hours, so that their goods and their business practice does not come to a halt.
Another example is the uncertainty in tax rates. A month ago, there were preparations for
VAT to be increased and if that had occurred then the businesses would have to increase
their product and service prices because an increase in VAT also leads to in an increase in
production cost and the costs of the goods. This impacts the customer satisfaction as there
will be an increase in price of goods and an increase in general cost of living. This impacts
the social factors massively as the people and customers is what makes your business stay
alive and able to work every day.
South Africa’s economy is very erratic, and this impacts the operations of the business, it
leads to a change in production costs to the business as well as having less stability
because of it being erratic. We can prepare for this by being ready for possible change.
ArcelorMittal South Africa (AMSA): a subsidiary of the biggest steel company in the world,
makes more than 60% of the steel made in South Africa and is the market leader in the area.
It is a huge company in the industrial world of the Netherlands, with its headquarters in
Vanderbijlpark. But things outside of its control, like new technologies, problems in the
supply chain, and efforts to be more environmentally friendly, are having a big effect on how
it runs. This article looks at these changes and what they mean for the future of AMSA.
ArcelorMittal South Africa (AMSA), Africa's largest steel producer, is extremely vulnerable to
exogenous environmental shifts. Of particular concern are aging technologies, supply chain
disruptions, and increasing calls for sustainability. Although the global ArcelorMittal Group
invests in green technology like electric arc furnaces and hydrogen-based steel production,
AMSA continues to be carbon intensive due to infrastructural and financial constraints.
Inefficiency in logistics and South Africa's carbon tax policy also put a strain on AMSA's
operations. To become competitive, the company must modernize production, make supply
chains diversified, and adopt sustainability. There is a need for strategic investment,
reskilling the workforce, and collaboration with government and regional stakeholders for
AMSA to achieve global best practices and secure its relevance in the evolving steel
industry.
Contextualizing Operations Management:
Managing procedures that effectively and efficiently transform inputs into outputs is the focus
of operations management (OM). In order to satisfy domestic and global demand, AMSA
must transform raw resources into steel products. OM has to contend with both internal and
external influences in the challenging industrial environment of South Africa, which includes
energy limitations, infrastructure issues, and international rivalry.
The following are components of the external business environment:
Innovation in technology, Dynamics of global supply chains, Changes in the environment
and regulations. Each of these troops must be strategically and operationally aligned with
AMSA. The effects of Technological Developments in Steel Production.
With new technical advancements that increase productivity, reduce emissions, and
enhance product quality, the global steel business is changing. Among the advancements
are automation, artificial intelligence (AI), and electric arc furnaces (EAFs), which are
revolutionizing the steel industry. The effect on AMSA will be that the Traditional blast
furnace technology, which uses about 600 MW of power and 22,000 Mlt of water yearly, is
the mainstay of AMSA. These procedures are less effective than the more effective ones,
such as recycling scrap steel through EAFs. Due to financial and infrastructure constraints,
AMSA has lagged behind the rest of the ArcelorMittal Group in implementing digital
manufacturing and green steel technology. Repercussions for AMSA In the absence of
technological reforms, AMSA will lag behind. Steel can be produced more cheaply and with
less of an impact on the environment by foreign competitors who have access to intelligent
manufacturing. AMSA has to use its group parent's research and development capabilities
to include automation, real-time data monitoring, and predictive maintenance into its system
in order to stay up. With a change in the dynamics of the Supply Chain Global circumstances
including as supply chain bottlenecks, COVID-19, and geopolitics have caused steel supply
chains to reorganize. AMSA's supply chain is further stressed by inefficiencies at its
outdated infrastructure in South Africa and issues with train congestion. The effect this has
on AMSA is the business is mostly dependent on imported raw materials, such as iron ore
and coking coal. Transport schedules are strained, and costs rise because of transnational
pricing fluctuations and delays. Delivery of commodities, both domestically and for export, is
delayed locally by Transnet's poor rail transportation and exorbitant port fees. AMSA would
need to improve logistics and diversify its supply base in order to be robust. In order to
facilitate real-time visibility and demand planning, this would entail establishing local
partnerships, integrating supplier relationships, and implementing digital supply chain
technologies. These steps would increase overall operating flexibility and lessen reliance on
brittle foreign connections.
In the majority of industries, sustainability is becoming a key strategic concern. Since
smelting is one of the most carbon-intensive industries in the world, stakeholders are putting
more and more pressure on manufacturers to practice environmental responsibility. The
majority of AMSA's carbon footprint is caused by its traditional steel production methods,
which use a lot of water and energy. The implementation of a carbon tax in South Africa
raises its cost of production. Even if the ArcelorMittal Group has pledged to achieve net-zero
carbon emissions by 2050, AMSA needs to take decisive action to help achieve this goal.
AMSA must start making the switch to low-carbon options including hydrogen-based DRI
production and EAFs. In addition to being financially advantageous in the long run,
investments in renewable energy, water recycling, and better waste management facilities
will enhance AMSA's reputation and ensure that it complies with future environmental laws.
A focus on sustainability can attract ESG-incentivized investors and open up new markets.
AMSA needs to proactively handle the following external challenges in order to be
competitive:
Technology Integration: Adopt AI, process automation, and EAF technologies for South
Africa by coordinating with the larger ArcelorMittal Group. Smart factories have the potential
to be both economical and efficient. Supply Chain Resilience: Create regional supply
networks and spend money on online tools to track supplier performance and logistics. The
effect of outside shocks will be lessened as a result. Sustainability Projects: Invest in clean
technology and energy efficiency to move toward the manufacture of green steel.
Participate in government initiatives to receive carbon credits and incentives. Workforce
Development: To increase creativity and adaptability, teach employees about new
technologies and environmental management. Foreign environmental changes present
ArcelorMittal South Africa with significant obstacles, but they also present a chance to
restructure the company as a more modern, leaner, more effective, and sustainable
business. Through the use of technological innovation, more efficient supply chains, and a
focus on sustainability, AMSA may recover and even thrive in a more competitive and
environmentally conscious global economy. Maintaining its dominant position as an African
steel producer will require strategic realignment with the assistance of its resources from its
offshore mother firm.
CONCLUSION:
In conclusion. ArcelorMittal evolving will depend on how ArcelorMittal advances themselves,
“through the use of technological innovation, more efficient supply chains, and a focus on
sustainability, AMSA may recover and even thrive in a more competitive and environmentally
conscious global economy” If they leverage technology and innovate themselves in line with
the fourth industrial revolution they will be able to advance their efficiency in their industry
and optimise their production needs. Investing in R&D (Research and development) can
help them identify the customer needs based on relevant research.
They should be optimising their Supply chain by building collaborative relationships between
supplies and customers alike this helps improve the supply chain responsiveness and
effectiveness. This makes the supply chain of ArcelorMittal more agile to change and
effective to combat set change.
ArcelorMittal needs to prioritise their sustainability and spoken about above, and I quote
“AMSA must start making the switch to low-carbon options including hydrogen-based DRI
production and EAFs. In addition to being financially advantageous in the long run,
investments in renewable energy, water recycling, and better waste management facilities
will enhance AMSA's reputation”
By pursuing these strategies, ArcelorMittal can effectively traverse the changes in the steel
industry. If they implement these strategies, they can sustain their competitive advantage,
and continuous innovative ideas can help them keep this competitive advantage. Building a
strong foundation in these strategies can help ArcelorMittal to grow and to have continuous
growth. The foundation in anything is most important, if you skip steps you are set to fail. If
ArcelorMittal keeps to their goals, they will be able to keep their name as one of the biggest
steel manufacturers in the world and in Africa. By prioritising operational success
ArcelorMittal can improve their customer satisfaction, increase competitiveness and grow
their long-term goals. Operations are fundamental to ArcelorMittal to deliver to their
customers, stakeholders and environment. Effective Operations are essential for
businesses to achieve their strategic goals. Effective operations can increase efficiency,
effectiveness, reduction in waste and increased business productivity. Following the basic
rules of Operations Management can help your business improve customer satisfaction,
competitive edge, increase profitability and promote business growth and continuous growth
to be more specific. Operations can help you improve every aspect of your business. The
external factors are of high importance to follow and to get the best results understanding
them is vital so that you do not get blind sided by the changes in the external factors.
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To reference the website in Harvard style, you can follow this format:
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