Steel Dynamics Inc. is a US-based steel producer and metal recycler established in 1993 with $10.5B in revenue in 2019. The company operates 20+ steel production and fabrication plants, 90+ steel recycling plants mostly on US soil.
Steel Dynamics Inc., (SDI), is a special company that has achieved 35.3% growth in annual profits (EPS) within the last 5 years (2014-2019). This growth is 3.5 times the Fortune 500 median from the same time period (%9.9). The firm has been outperforming its peers in the US steel industry as well as emerging competitors in Asia-Pacific and Southeast Asia regions in terms of profit, revenue and growth.
Differentiation from the Industry
SDI has begun a digital journey to persevere amidst the volatility and geographical shift of the industry. The company transformed its financial operation to a real-time monitored and optimized system. This enabled them to highly regulate and optimize their cash flow.
The company nurtured an innovational culture to challenge the most matured norms of the steel industry. Several SDI factories have transitioned to electric arc furnaces from traditional blast furnaces to melt ferrous metals into steel slabs and sheets. This move also enabled the company to utilize its differentiated supply chain operation to gather scrap metal and recycle them into steel production process.
As an industrial incumbent, it is challenging for SDI to transform their legacy business models and their usual way of working into a customer-centric and agile version fit for the 21st century. SDI has managed to shift its primary focus from their best practices in 2015 to a more customer engaging and friendly operation, and build up customer satisfaction in both domestic and international markets.
High net cash flow has also enabled the company to invest in customer-first initiatives and strategic acquisitions to deliver on-time and become more flexible to custom orders from clients. The engagement resulted in more streamlined customer engagement scenarios and simpler processes, overall.
The Digital Edge
SDI has now integrated its critical financial and cash flow operations on Azure Cloud stack. SDI began its cloud journey from an easily accessible operation to limit the seasonality of cash flow and increase cash availability throughout the quarters.
Free float net cash provided SDI with enough windows to rapidly and continuously invest in new production facilities, facility modernizations, and strategic acquisitions with considerably lowered debt equity ratio.
Rapid investment in existing and new steel production facilities directed SDI to a more automated, monitored and cost optimized manufacturing regime. The added benefit of this transformation is decreasing the carbon footprint of each production facility which adds up in SDI’s sustainability indexes.
Incumbent Stance on SDI Journey
As an incumbent itself, SDI was not satisfied with its current position in the market and wanted to change course to utilize headwinds of digital age for its rapid growth. The incumbents of steel industry also should question their primary focus as Steel Dynamics did.
Steel Dynamics began from a low hanging fruit for its operations by digitalizing its financial operation and shifting to customer-centric processes. SDI transformed its business model for a more adaptive framework readying itself for the future opportunities and threats.
The initiated transformation helped SDI to drive unit manufacturing cost considerably lower than its peers (double digit decrease over 2015-2019 period) and to increase net cash flow into the company by two-folds over a mid-term time period.
Even in highly matured industries such as metal & steel manufacturing incumbents can target low hanging fruits of their operation to begin small and build onto the stack year-over-year. The results are if successfully executed, sure to be dramatic on the balance sheets even in the mid-term periods.