UC RUSAL Business System

UC RUSAL Business System is the environment for the development of personnel and the creation of a culture aimed at the continuous improvement of the Company’s production and business processes, the creation of a unified system approach to understanding tools for increasing efficiency, introducing and disseminating the production system of RUSAL.

UC RUSAL Business System (BS) is based on the TOYOTA Production System (TPS), which allows for continuous improvement of production and business processes, promptly responding to customer needs, and remaining an effective company in the world market.

The purpose of the construction and development of the BS is to build through business chains from the supplier to the customer and to manage their expectations and needs effectively, and to introduce a culture of continuous improvement on production facilities. BS is set up on a Company-wide scale, including foreign assets.

Structure of the BS management

The objectives of the BS are related to the overall strategic objectives of the Company: key objectives and quantitative indicators for the next reporting period are formulated each year. Specific targets are set for each division and production facilities. Each head (senior foreman, head of shop, head of unit, head of production, head of the area) should have his/her project of BS development and report on its implementation to the CEO.

On-site steering committees are held several times a year to develop the BS at the production facilities. Each of them is attended by senior management: members of UC RUSAL executive committee are required to attend.

Kaizen workshops are an effective tool for optimisation of production processes and standardisation of technology operations that allow employees to implement the proposed improvements. Kaizen workshops operate on 10 production facilities of UC RUSAL in Aluminium, Alumina and Packaging Divisions, as well as the New Projects Directorate.

Kaizen improvement indicators for the BS development

Number of proposals received from employees

Number of implemented proposals from employees

Number of kaizen workshops

‘Improvement of the year’ competition

The annual ‘Improvement of the year’ competition is held in four categories: Security, Quality, Performance, and Cost Effectiveness. The proposals received from the employees are evaluated, the best are recognised as winning and implemented in production. UC RUSAL receives a significant social and economic effect every year from the implementation of the proposals received: In 2016, the expected economic effect from the implementation of improvements was of USD 10.5 mln.

Number of employees who took part in the competition

The implementation of BS requires maximum participation, understanding and commitment of all employees of the Company, including senior management. Therefore, staff development and training in relevant management mechanisms and tools, and the introduction of procedures for the identification of leaders at the workplace (the BS 250 programme) are mandatory elements of the BS management.

Together with the HR Directorate, training is provided to the members of the Executive Committee and to the Kaizen teams members of production facilities on the principles and ideals of the BS at the training sites and model sites of the key production facilities. In the reporting year, a decision was taken about the annual cycle of the BS 250 talent pool training programme. At the same time, the graduates of the complete training cycle will make up at least 10% of the total number of candidates.

In 2016, all members of the Executive Committee, including heads of divisions, as well as 15 top managers (managing directors and division directors) were trained and qualified in the methods and approaches of the Business System.

Training of employees in the principles and tools of the BS

Number of persons trained in total, including

internal training, persons

external training, persons

distance learning, persons

Number of on-hand training sessions on various topics related to the organisation and improvement of the production process

The training of BS talent pool provides continuity in the approaches to the management of BS implementation process and accumulates the Company’s experience. In 2016, 127 persons were recruited from the three stages of the selection process, of which 78 were assigned to different positions (including 59 to top positions). Of the 2015 admission, 84 persons were assigned to different positions (including 56 persons who were promoted).

The Company has a strategic goal of lowering the unit cost of production and business system projects can make a significant contribution to its achievement by lowering transport costs, eliminating the cost of repackaging, and by the lack of claims from the customers in terms of delivery schedules, effective maintenance and maintenance of equipment and other improvements.

Efforts to improve the efficiency of industrial equipment, including the reduction of planned and unplanned downtime, continue to be systematically pursued. A methodology for evaluating the overall equipment efficiency (OEE) is being introduced. The Company analyses the data received to find additional equipment reserves.

In 2015, several pilot projects were launched to increase output through improved equipment efficiency, and in 2016 the first results were obtained:

• two projects were implemented at the Krasnoyarsk aluminium smelter. As a result, the performance of the casting unit No 5 for the production of slabs rose from 10,5 thousand tonnes per month to 11,5 thousand tonnes per month, and the performance of the casting unit No 16 for the production T-bars rose to 4,900 tonnes per month,

• at SAYANAL as a result of reduction in the time of changeovers and downtime of the foil mill S-2 increased the production of foil to 2720 tonnes per month.

BS development Indicators

Number of projects aimed at the development of UC RUSAL BS (Company-level projects for logistics operations, quality, supplier development, etc.)

Number of on-site projects (production facility-level projects aimed at reducing losses, optimisation of equipment operation, etc.)

Number of projects in A3 format (projects at the level of business units and areas – each worker can initiate and defend his or her project on any topic)

Interaction with consumers

Since 2015, the priority in business system development is to build through business processes from supplier to consumer, to work with key customers and suppliers.

The key suppliers of the Company include producers of alloying materials, coke (Lukoil-Perm), pitch (West Siberian Metallurgical Plant), aluminium fluoride (PhosAgro) and other raw materials and supplies required for the production process. The professionals of UC RUSAL Business System meet with partners, talk about TPS, show examples of the impact of the business system on production culture and processes, then help them fix the problem areas. Thus, the supplier is given knowledge and training, when interested.

For the benefit of the consumers and to increase flexibility in production and logistics, a number of projects were opened in 2016 to reduce the lead time (the period from the receipt of an order to the delivery of the ordered products). In particular, the following were open:

— project of ‘Optimisation of the supply chain of the finished products of the caster No 5 of the Krasnoyarsk aluminium smelter to European consumers’, customer – ELVAL S.A. (slabs). Achieved lead time – 60 days,

— project of ‘Optimisation of the supply chain of the finished products of the caster No 10 of the Bratsk aluminium smelter to Asian consumers’, customers – KOBE STEEL LTD., UACJ Corporation, Novelis Korea Limited (slabs). Achieved lead time – 60 days,

— project of ‘Optimisation of the logistics of the supply of 3104BT slabs produced by the Krasnoyarsk aluminium smelter (caster No 4) to the Arconic SMZ’, customer – Arconic SMZ. Achieved lead time – 20 days,

– project of ‘Lead time reduction in the USA. Reduction of the lead time of the orders and improvement of the utilisation of the capacities of primary alloys in T-bars, caster No 16 of the Krasnoyarsk aluminium smelter’, customer – General Aluminium Manufacturing Company. Achieved lead time – 75 days,

On the future, it is planned to scale the results to other production facilities, products and consumers of the Company.

To reduce product delivery times and optimise the supply chain, projects are planned at the Bratsk aluminium smelter, Krasnoyarsk aluminium smelter and SAYANAL foil mill.

On certain production facilities, new pilot projects will be opened for preventive maintenance of equipment and for the organisation of stable schedules of carload freight by railway.

*Предлагаемые к заключению договоры или финансовые инструменты являются высокорискованными и могут привести к потере внесенных денежных средств в полном объеме. До совершения сделок следует ознакомиться с рисками, с которыми они связаны.

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