Steel procurement strategies

Abstract

Steel supply chains today have an exponential price increase over the value-adding industries. Furthermore, cost increases in today's steel supply chains increase exponentially towards the final product. This thesis shows that through the control of relevant cost factors and setting up new steel supply chain structures, manufacturing companies can achieve linear price- and cost development. Subsequently, manufacturing companies can lower their total steel cost in the long run. The goal is to understand what these factors are and how these should be controlled.

The typical steel supply chain is analyzed and broken down into cost factors. Using a framework, the relative impact of the cost factors on the steel supply chain is analyzed. Through supply chain analysis and application of findings of the framework, the most important cost factors to control are identified.

As a result, a supply chain control framework is erected which shows how the identified cost factors can be controlled. The framework is benchmarked to the steel supply chain restructuring efforts of the case company, and the benefits of the control framework are quantified. Improvements to the efforts of the case company are suggested and concrete implementation advice and suggestions are made.

The savings impact for a manufacturing company implementing the suggested framework is measured in whole percentage points of the total costs of goods sold.