CRGO Laminations: Inhouse manufacture or Outsourcing

The earliest process to manufacture Cold Rolled Grain Oriented Electrical Steel, popularly known as CRGO, was first CRGO Laminations- In-house manufacture or Outsourcing?

A debate has been triggered by the decision of some State Electricity Boards (SEBs) decision to specify as a tender condition that Transformer manufacturers (TMs) should have their own Transformer Lamination manufacturing facility. SEBs are now imposing tender conditions to the effect that “ONLY those Transformer Manufacturers who have their own core cutting facility would be eligible to participate in the tender”.

This move ostensibly is to prevent the use of Secondary/Defective and old and used CRGO Silicon Electrical Steel in Transformers which supposedly leads to increase in No- Load Losses, Magnetising Current drawn and results in the failure of Transformers.

It is therefore necessary to analyse whether, this condition suggested by some TMs who have their own core cutting facility and disguised as a “magic pill” that would lead to better quality of Transformers being manufactured is valid and the implications thereof.

At the very outset let me state that, as the Managing Director of a Transformer Lamination facility, my Company is an interested party in this debate, however, the analysis given herein is from an impartial perspective to genuinely assess the contention that, “an in-house core cutting facility automatically leads to a better quality of Transformer Laminations and thus better Transformers”.

The importance of Transformer Lamination on Transformers is evident from the name the component has been given by the Transformer industry – “the core” – as it is considered to be the heart of every Transformer.

Failures in Transformers due to magnetic core or circuit can be due to various reasons. The J&P Transformer Book (11th Edition, published by Butterman Heinworth, General Editor C.A.Worth) accepted by Electrical Engineers worldwide to be a standard reference for Transformer design, Chapter 24 deals with this issue. Amongst the 13 reasons stated therein for the failure of Transformer due to failures in the magnetic circuit, the following 5 reasons seem to be of relevance for this discussion:

1. Failure of insulation between Laminations and of the insulation between the yoke and the yoke bolts producing large eddy currents, generating a considerable amount of heat.
2. Burrs developed during manufacture resulting in local short circuits, eddy currents and consequently abnormal heating occurring.
3. The presence of metallic fillings or turnings present between the Laminations are liable to produce local eddy currents and excessive heating of the core.
4. Abnormal gaps left between the cores and the yoke would result in severe eddy currents and burning of the cores and yoke in the vicinity of the gaps.
5. In older Transformers ageing of the core plates may take place and result in increase of iron loss and rise in temperature of the Transformer which may result in partial or complete destruction of the coil insulation and sludging of the coil.

In view of the above, let us analyse if these reasons for failure could be definitely avoided if the producers of Transformers were to manufacture the Transformer Laminations in-house instead of buying from a Lamination manufacturer (outsourcing).

Reason No. 1 (weak insulation) and 5 ( old and used Laminations) above are related to the quality of raw material used and therefore if the Laminations are made from inferior quality of CRGO material then definitely there is a possibility that these reasons would be applicable. However a TM with an in-house facility to produce Lamination is as prone to usage of inferior quality of raw material ( to save on material costs) as a TM who out sources this activity. The counter argument here maybe that a TM who buys from outside may not be aware of the quality of raw material used by the manufacturer of Laminations, who may purposely use inferior quality of raw material without informing the TM. However if the TM has an inward material receipt inspection system, this fact would certainly be brought to notice and the TM must take appropriate action. If the TM does not have an inward material inspection system then not much can be said about that TM’s quality of Transformer, in any case.

Reason Nos. 2 (Burrs in cutting), 3 ( turnings or steel residue between Laminations) and 4 ( gaps between yoke and core plates) are precisely the reason why the activity of manufacturing Laminations should be outsourced and not done in-house.

This is because, manufacturing of Laminations though a seemingly simple job of shearing, cutting and notching, is in reality a high precision, high accuracy job. The thickness of the sheet being handled and cut is only 0.23 mm to 0.35 mm or 230 microns to 350 microns. Also the sheet should not be bent, dented or damaged during handling as this directly affects the core loss and the magnetic property of the resultant core. The dimensional accuracies in terms of length , breadth and the angles ( 45 degrees or 90 degrees as the case maybe) have to be within the tolerance, the V- Notch in the yoke has to be precisely done so as to accommodate the yokes without airgaps, holes have to be accurately punched so that the clearances of the bolts are adequate, the slitting has to be perfect to avoid camber and variation, the burrs have to be within the specified tolerance. These are just some of the parameters to be controlled during the manufacture of Transformer Laminations.

A TM, whose main production activity and expertise is in the manufacture of Transformers and or electrical equipments would not only have to be aware of the nuances of the manufacture of Transformer Laminations but also develop the expertise to implement these checks and controls.

A Quality conscious manufacturer of Transformer Laminations would certainly be aware of all these aspects and developed the requisite expertise for production control of these crucial parameters. Further a Quality conscious manufacturer of Transformer Lamination would also have the trace ability of the materials used and therefore it would be possible to check at any time from production records maintained the raw material used.

Thirdly from an economic standpoint it is never competitive to manufacture the components of any equipment inhouse. The Transformer industry is comparable to any assembled product manufacturing industry like the automobile industry or the computer hardware industry. Very few components of the assembled products are manufactured by the original equipment manufacturer (OEM) themselves. Almost all the major components as well as minor components are outsourced to vendors as it is acknowledged that a reliable, quality conscious manufacturer of components would be in a position to supply better quality of components at a very competitive price. Therefore many OEMs work closely with their vendors to develop their manufacturing as well as managerial capabilities.

The reason for this is economic as well as managerial. The economic reason is that a component manufacturer, like a manufacturer of Laminations would have better economies of scale in the procurement of raw material as well as better management of inventories. As an example consider that, a TM who manufactures Power Transformers upto 50 MVA would typically have a requirement of a large quantity of say 500 mm to 600 mm width of CRGO coils for manufacturing of their core. Now CRGO producing mills produce CRGO coils in the width ranging from 863 mm (A.K. Steel, USA ) to 1000 mm ( most other mills) . If the TM were to manufacture the core in-house, they would have to keep in stock balance “left over” coils generated after the use of the larger widths by them. These “left over coils” would then have to be disposed at a far lesser price than the cost of raw material to manufacturers of either Transformer Laminations or Transformers who would have some use for them. Alternatively, the TM would have to hold the material in stock as till the time that they have some order where the same could be utilized. As the TM is basically a Power Transformer manufacturer it would be very difficult for them to utilise this material or they may be forced to take some orders for a lower rating at a lower price just to utilise this “left over” material!

Further CRGO comes in at least 15 different “grades’ with different core losses and thick nesses. Expecting a TM to stock all or most of these grades also makes no economic sense. A Lamination manufacturer whose business it is to manufacture Laminations is in a much better position to forecast the stock requirement and stock the same for supply on time

From personal experience we find that our customers give us their monthly production planning and operate on “Just in time” inventory as far as the Lamination requirement goes. This enables them to plan their working capital in a much better way and also improves the overall efficiency of their operations.

Of course from an economic standpoint, the cost of the above in-built inefficiencies in in-house manufacturing by TMs would be loaded on to the final selling price of the Transformer that the TM produces. So the SEB would be forced to buy at a higher price from a TM who has an in-house facility to manufacture Laminations if they insist on the in-house manufacturing condition!

From a managerial standpoint the Law of “Focus on your core competencies” needs no elaboration. A Quality conscious Lamination manufacturer, would definitely be able to mange the manufacturing operations, the wastages and reduce the inefficiencies far better than a TM can. This is because a Quality conscious Lamination manufacturer would “know the business” and therefore better placed to run a leaner outfit producing at a lower cost than a manufacturer of electrical equipments. In a competitive environment, this would translate to a more economically price of Transformer Laminations and ultimately more economical Transformers.

However the problem of SEBs and TMs maybe that there aren’t that many “Quality conscious” Transformer Lamination manufacturers. The problem would also be compounded by the large influx of secondary, defective and old and used CRGO material into the country which is then reused in new Transformers, thereby leading to the problems enumerated at the beginning.

So what is the solution?

The solution, according to me, is two fold:

Ensure that the Lamination manufacturers that the TMs buy from are approved by the SEBs, or are accredited by some international recognized certification body like ISO 9000 etc. to ensure that a minimum quality parameters and tolerances are maintained.

The TMs, SEBs and the Quality conscious Lamination manufacturers jointly take up the issue of restricting the imports of secondary , defective and old and used discarded Laminations in the country in the interest of the nation and also to ensure that these materials are not used in the manufacture of Transformers.

In conclusion it can be said that, expecting better quality of Transformers by simply stipulating a tender condition requiring TMs to have an in-house core cutting facility is naïve and counterproductive economically as explained above.