Introduction to Alcoa - Case Study Example

Journal Introduction to Alcoa 01/10/08 Alcoa is an organization, described by its operations, values, sustainability framework, community engagement, research and development and the people. These aspects should be considered by major importance for any engineering company in the world, and need to be further analysed with regards to Alcoa and the Aluminium industry. This organization is globally recognized and has extended its operations all over the world. Its structure is represented by five business groups i.e. global primary products, global rolled products, hard alloy extrusions, global extruded and end products and aerospace, automotive and commercial transportation. Looking at the organization history, Alcoa was established in Australia in the year 1963 with an alliance between Western Mining Corporation and Alcoa. Its main domestic operations occur in Western Australia, Victoria and New South Wales. Western Australia is principally involved in the mining sector at Huntly and Willowdale mines as well as the refining sector at Pinjarra, Wagerup and Kwinana. Western Australia supplies the alumina market by 11%. Following this, the alumina is transported to the eastern states for smelting at the Portland and Point Henry Smelters, which are responsible for 30% of the Australia aluminium production. Finally, the aluminium is transformed in rolled products at Point Henry and Yennora, which are exported to Asia in proportion of 50%. Through its operations, this organization contributes to the economy of Australia. Its exports total $5 billion, and 80 cents per dollar are remaining in Australia. It also contributes by offering jobs to over 6000 employees and 1000 full-time contractors. In what concerns the socio-economic contributions, this organization made a difference through the Dampier to Bunbury gas pipeline, the power infrastructure in south-west Victoria, an electricity association with Alinta in Western Australia, as well as the largest single rail customer in Western Australia. Furthermore, Alcoa mainly invests into the research and development sector and training sector in order to facilitate improvement in operations and procedures. The comparative advantage of this organization is related to its people, customer relations, world leading research and development and the entire operating system (i.e. the key elements which make Alcoa such a global force). Considering the difficulties the industry is facing i.e. increasing prices of raw materials, high labour costs, high Australian dollar (not any more) and increased competition from China, Alcoa is implementing solutions to these challenges such as continuing to drive energy efficiency and reduce emissions, looking for technology breakthroughs and lower carbon fuel options and evaluating the potential for carbon offsets and credits. Moreover, this organization has secured long term supply contracts with ARC energy, has implemented the cogeneration plants at Pinjarra and two open cyclone plants at Wagerup. This proves that Alcoa is still a stable and sustainable business with significant growth opportunities, even if it faces difficulties from the market in which it operates. As a strong organization, Alcoa places great importance on its stakeholders (e.g. customers, shareholders, communities and people) and shares values as integrity, environment, health and safety, customers, excellence, people, profitability and accountability. Alcoa treats with respect and protects its employees and the community by delivering safe and sustainable products, and meeting the needs of the current and future generations. Moreover, this organization looks forward to the next generations by ensuring reductions in raw materials, energy usage, emissions and occupational illnesses and injuries. Because nowadays, it is very important to consider the environment, Alcoa focuses in greenhouse, reducing emissions, residue and waste management, mine rehabilitation and water conservation. This organization participates to the emissions trading scheme, and also looks at the new generations by set ting targets for greenhouse reduction as well as improving the efficiency of cogeneration power plants significantly in contrast to other plants. Another solution in this matter is the aluminium because it can reduce emissions through light weighting cars and reducing emissions as well as recycling. Moreover, management of the bauxite residue through the carbonation process has proved to reduce the alkalinity and locked in greenhouse gases. Another characteristic of this company is the strong community engagement with relationships being built for safe and healthy families, youth development as well as conservation and sustainability. The paper addressed a thorough understanding of the Alcoa organization and the ways in which it operates to satisfy the best interest of its stakeholders (e.g. customers, employees, the community and the people). This organization meets all the qualities of a recognized global organization with the attitude for improvement and better performance in regards to operation, health and safety, the environment and the community. Alcoa has the goal of being the best company in the world and the current framework in place allows this to be pursued. Overall, it strengthened my understanding of the layers of a company, the structure of an organization and also the different operations that are necessary to facilitate the success achieved globally by Alcoa. Journal Entry #2 – Quality Management 08/10/08 Quality can be defined as the degree to which a product meets its intended purpose of function. Personally, I relate quality with durability and high performance, i.e. the product is doing its designed job over a realistic time period. A principle related to quality is that the higher the quality, the higher the cost. However, from my own experience this is generally true in regards to products, but is definitely not always the case with regards to services. Customer satisfaction is very important in business, and it must follow some principles. One of them is that a company must have customers to stay in business. Also, customers who like what the company deliver swill give money to help the company to stay in business. Features that will satisfy a customer besides quality, are cost (value for money), delivery (when and where promised) and reliability (does not fail during its expected life). A process can be defined as a sequence of operations through which inputs are transformed in outputs, creating value in this way. Each operation within the process needs to be performed at the optimum level in order for the product to meet standards related to quality, cost, delivery and reliability. The process goes through five stages: Suppliers, Inputs, Process, Outputs and Customers (SIPOC), and needs to operate within the constraints of the company, government, environmental, safety etc. The operating processes through which the business will create value are people, safety, environment, waste, time and profitability. There are also unnecessary elements in the operation such as over and under production, excess conveyance costs, over processing, excess inventory etc. An example for illustrating these elements is over processing a product which is already acceptable quality and hence resulting in excess wear of equipment as well as wasting raw materials, energy and time. The appearance of such unnecessary elements needs to be minimized in order to improve the quality of the operational process. Quality of a process can be assessed by variation i.e. improving quality requires a reduction of variation around the optimum target. In order to study the variation, statistics can be used. For example, this was demonstrated with the comparison of the quality of reflex paper and a generic brand of paper, which arrived at the conclusion that the reflex paper clearly had a greater portion within the limits of acceptable quality paper. In order for the products to be qualitative, there is both a target and a limit. The limit is what is considered acceptable to the customer. However, problems can result if a company is becoming complacent with its set target and limit not being close. Every company should try to minimize the difference between the target and limit, which will lead to less variation. Considering the averaged monthly shipments of the 325 Mesh at Alcoa chart, the fluctuation of the product can be clearly seen over the time period and is generally within the limit. The first chart should be utilized to assess the quality limits of the product, while the second chart should demonstrate if the shipment satisfies most customers. It can be observed that many shipments are out of specification, there is significant ship to ship variability and there is limited improvement over 3 years so a problem arises because customers receive individual shipments not averages. The Kwinana Refinery Digester case study also exhibited significant variation in the daily tonnage production, which can suggest lost opportunity due to loss of capacity and in this way loss of production and profits. Quality is important for every stage of the process so the SIPOC model can be applied for each process with the supplier being the previous process and the customer being the next process within the operation. For instance, quality for employees is composed of concepts, beliefs, techniques and tools that support and encourage people to focus their behavior on customer satisfaction, waste elimination, doing the right things right etc. Employees will perform their job efficiently if given the chance and the right environment, i.e. they are trained and suited for the job, know the outcome required from their process etc. For this part, management plays a major role in providing this environment to allow the employees to realize their full potential and contribution to the company. The Wheel and Wedge Model can be defined as a process improvement model composed from the following stages: Planning, Doing, Checking/Studying and Acting. Planning necessitates analysis of the whole operation such as customers, critical processes, people, the environment etc. In the case of Alcoa, quality improvement process involves: identifying improvement opportunity, selecting an opportunity, analyzing the cause and effect, generating potential actions, evaluating and selecting actions, testing effectiveness of action, implementing and monitoring. The Alcoa Business System implies three important principles: make to use, eliminate waste and people linchpin the system. This system aims to integrate all quality and business strategies into one integrated business strategy. The lecture delivered a comprehensive understanding of the necessity of quality management in the industry environment. Quality should be considered when providing products and services to the customers and also in the operations and business of the company to ensure quality through the entire operation. An aspect necessary to be remembered is that all process exhibit variations and any variation from the specification along the operation line is waste. In the conclusion, variation is the enemy that must be controlled and reduced to allow continual improvement in quality. Business And The Chemical Engineer 15/10/08 A proverb is that a chemical engineer does for a penny what any damn fool can for a pound. This phrase illustrates the idea that a chemical engineer is all about finding solutions which are cost effective through the combination of their technical abilities and knowledge, as well as having a vision of innovation and creativity. In the case of Alcoa, the chemical engineer can play a variety of roles; from the area chemical engineer to the project chemical engineer to the process control or modeling engineer. Each of these roles can be described by different objectives and in this way different technical qualities, as well as different process experience are necessary. Each Operation Centre has one or more Area Chemical Engineers, responsible for the technical part of the process. The Area Chemical Engineer must become an expert on their particular part of the process, whereas the chemical engineer has duties in a number of different areas, hence indicating the importance of his job in maintaining smooth operation. Moreover, the chemical engineer has the duty to obey all safety regulations, work safely and be proactive rather than reactive to any hazards. An example in this matter is in the case of participation in an operating team, the chemical engineer must demonstrate superior safety awareness and attitudes, be alert for hazards or safety issues, notify others regarding safety issues and assist with safety reviews, audits and accident investigations. Most importantly is that safety must have a primary place in all considerations of a chemical engineer’s career and nothing should come higher than safety. Another important consideration is that the chemical engineer must have a thorough understanding of the process and in this way foresee potential environmental issues and hence immediately correct them. Also, he should be able to deduce the cause of emissions and hence provide recommendations or measures to prevent them. In the case of changing design or procedures, possible environmental outcomes need to be considered by the chemical engineer before implementing the changes. Another responsibility of the chemical engineer is to ensure the product quality and to set and monitor process conditions within his operation centre, which affect the product quality (e.g. in the alumina refinery the grinding process is chiefly about reducing the bauxite to optimum size). The chemical engineer must have some key product quality indicators/parameters in order to assess if the targets are on track. He must also be able to anticipate issues before they manifest in quality issues (e.g. if the product is out of specification). Furthermore, the chemical engineer has the duty to supervise the production output and yield and for him to manage this, thorough knowledge of process chemistry, thermodynamics and reaction kinetics of the operation are needed. Usually, there needs to be a compromise between two targets as they may conflict each other. Other responsibilities of the chemical engineer are in the area of cost management i.e. maintenance and raw material costs (e.g. equipment fouling and overuse of raw materials). It is important for the business that chemical engineers are able to explain any deviations from set targets and make recommendations for the future. Probably the most important responsibility of a chemical engineer is people management because he needs to gain respect from his peers in order to manage and coordinate those around him effectively to successfully run his Operation Centre. In order to fulfill this task, he must demonstrate his technical knowledge. Related to what was previously mentioned, the chemical engineer must be also involved in project management, plan and budget preparation, operational accounting, raw material specifications and the performance support system. All the things characterized previously demonstrate the complexity of the chemical engineering role since they have the ability and knowledge to dictate the majority of the operation. The participation of the chemical engineer in numerous activities within a chemical plant requires the appropriate technical, people and personal attributes as well as competency using a variety of software for presentations, meetings, calculations etc. Although, this seems overwhelming for a chemical engineering graduate, I think these things will progress naturally with plant exposure and experience. In the case of Alcoa Business System which was mentioned in the quality management lecture, is also important to relate it to the chemical engineer. The three principles of make to use, eliminate waste and people are the linchpin are the foundation to operation at Alcoa so the ideal state for operation at Alcoa is on demand, defect free, 1x1, no waste, immediate response and safety. This lecture provided the most applicable knowledge as it relates directly to whom the chemical engineer is and the tasks, duties and numerous roles we can expect to be involved with when working for a company such as Alcoa. Journal #5 – Financial Accounting 22/10/08 Financial accounting is the process of disclosing financial information that can be used to make decisions regarding economic, control and investment decisions. Definitions were given for some of the common accounting terminology e.g. assets, liabilities, expenses, accrual basis of accounting etc. These were terms I was already familiar with since this a topic I am quite interested in. In the case of Alcoa, its financial statements are prepared in accordance to Australian Accounting Standards as well as other regulations, similar to engineering design in which we have compliances to our own set of codes and standards. The annual report provides information useful to existing shareholders and stakeholders (e.g. potential shareholders, creditors, employees, unions and governments). The report contains all the required financial statements i.e. the income statement, balance sheet, cash flow statement and lots of other financial information. The income statement and the balance sheet are a source of information about the company, and provide prediction of growth and future economic trends. The balance sheet classifies the assets, liabilities, and owner’s equity at a specific point in time, and the assets and liabilities are sub classified into current/non-current and also tangible/intangible. The owner’s equity is formed from 3 broad categories: contributed equity, reserves and retained profit. Every transaction requires at least 2 entries in the balance sheet in order to provide the balance of the ‘basic accounting equation’. The balance sheet is an indicator of the financial position at a particular time, but investors are also interested to know how the company is performing over a period of time. In order to find the financial position over a period of time, the net cash flow and net income are two of the common performance indicators used. However, net cash flow is actually not a such efficient indicator of a company, and a solution is considering the accrual accounting method was in which revenue is recorded when it is earned rather than when the company receives the money (i.e. revenue recognition principle). This also applies to expenses incurred in earning in order to respect the matching principle. Finally, the net profit is computed as the difference between the revenue and expenses incurred during that time. Another financial statement i.e. income statement reports the revenues, gains, expenses, losses, net income and other totals for the period of time considered. As was mentioned above, revenue is recognized when it has been earned, i.e. when the product has been delivered or the service has been provided, not when the money has been received. Analysis of financial statements requires the consideration of two main groups of relationship i.e. structural and trend relationships. Structural relationships are between items of a group or between groups of items, while trend relationships involve comparison of data over time to determine favourable/unfavourable movements and in this way which measures are needed. An example is the current ratio, which is a common test of liquidity and is the ratio of the current assets to the current liabilities. A high current ratio could suggest that the company has too much inventory on hand. Another indicator, the working capital is the difference between current assets and current liabilities. Several other ratios were mentioned e.g. return on shareholders’ fund, debt to equity, earnings per share and price/earnings ratio. Another important issue considered is taxation because it regards to interfacing between capital and maintenance. Maintenance stems around work at maintaining the original design specifications and hence involves replacing and repairing items, whereas capital in the form of modification and upgrade involves changing the design specification of the original plant and in this way supposes changes in capacity, efficiency and product quality. An asset can be defined as a piece of equipment that is not consumed as part of routine maintenance or production processes. The lecture provided useful information from a personal perspective since I have always had an interest in accounting, as well as offering a better understanding of the topic considering the chemical engineering. In conclusion, financial analysis provides the decision making tool for assessing operation feasibility, profitability as well as projection of future trends. In the coming years I would definitely be attracted to branching off into the financial sector of an engineering company. Read More