Why deploy applications technology to control and manage raw material costs?

Transcription

1 Why deploy applications technology to control and manage raw material costs? A Presentation for Monday June 18, 2012 Presented by Systems Alternatives International, LLC

2 Why deploy technology to control and manage raw material costs? Over the last 20 years the steel industry has done a remarkable job in driving down costs in areas other than raw materials They have invested heavily in scrap consuming Electric Furnace Shops and supportive equipment and technology Improved Energy efficiency by 30% * Decreased man hours per ton produced by 80% * However Since 1992 scrap prices have increased roughly 3 and a half times * These lower energy and labor costs when combined with higher scrap costs per ton have made raw material cost the single largest cost component per ton of steel produced. * All information was obtained through American Iron and Steel Institute publications, US Geological Survey Reports and from public company annual and quarterly reports or investor presentations.

3 Why deploy technology to control and manage raw material costs? Raw material s represent over 60% of the cost of most finished steel products * Raw Materials 60 % or more All other costs combined 40 % So, why deploy technology to control and manage raw material costs? IT S WHERE THE MONEY IS!

4 So how can you deploy technology to help control raw material costs? Step 1. By creating a real time high level view of your entire raw material supply chain. From orders through consumption with projected inventory levels and landed costs. (IMPACT Buy Plan) Step 2. Integrating all supply chain and raw material activities. From production planning, purchasing, logistics, receiving, settlements and payable's, perpetual inventories, material consumption, transaction exception reporting, fraud detection and prevention, automated SOX compliance reporting, supplier self service portal and the automation of Mill / Supplier transactions. Step 3. Use of simple tools to efficiently react and control the supply chain as market or production changes occur.

5 Raw material processes - procurement and inventory tracking through consumption Buy Plan Management System Raw Material Purchase Order System Order Management and Supplier Communication Raw Materials Settlement and Payables Supplier Information Portal General Ledger Interface to Mill Financial System Freight Rate Data Base Management System Scale House Truck /Rail Transactions Processing Raw Materials and Home Scrap Inventory System Web Based Information Center Transaction Exception Auditing Mill / Supplier Transaction Interface Melt Shop Raw Material Management

6 SAI Generic Mill Buy Plan

7 Interactive Order Management with what if? And Supplier Notifications Buy Plan Position 2300 GT

8 Sample Automated Supplier Order Status Change Bob Smith

9 SAI Custom Mill Buy Plan Management Applications

10 Special Raw Materials Purchasing

11 Special Truck/Rail Scale Applications

12 Raw Material Perpetual Inventory

13 Supplier Information Portal

14 Transactions Exceptions Monitoring and Audit

15 Supplier Management and Transaction Settlement Systems

16 Easy to access to information via Web Based Reporting

17 Analyzing the Potential Benefits of Interfacing Raw Material Purchase Transactions with Suppliers. Lets look at two examples: Mill One consumes an average of 75,000 GT per month Mill Two consumes an average of 200,000 GT per month Each mill receives 40% by truck at 20GT, and 60% by rail at 80GT per load Typical transaction processing would require, on average, each of these shipments to be handled approximately 7 times. This means that; Mill One would handle shipment data 18,375 times per month Mill Two would handle shipment data 49,000 times per month

18 Mill - Supplier Transactions Interface Overview Secure Internet Mill Consumer Connectivity Supplier Yard Legacy ERP 1 SAI IMPACT Buy Plan, SIP, Browser Apps 2 Mill Purchasing Creates Purchase Order Creates Inbound Notice in SAI Scale Creates Unapproved Sales Order 3 Ship Notice Created from SAI Scale SAI CRES 0 Trader Reviews Approves Sales Order 1 Auto Create Material Requisition with Freight Liability & Minimum 2 SAI Yard Weighs Outbound Vehicle 3 Mill Scales Gross Weighs Date & Time Recorded 4 Mill Scale Tare Weighs Date & Time Recorded 4 Receiving Weights Posted to Shipment WARNING: Auto- Sent if Net Wt. Dif. is Out of Tolerance 8 General Ledger Posting 5 Accounts Payable Created 6 Inventory Posted WARNING: Auto- Sent if Wt. Dif. is Out of Tolerance 7 Checks. ACH Payments Sent 5 Accounts Receivable Created 6 WARNING: Auto- Sent if Payment. is Out of Tolerance Optional Automated A/R Posting With in Tolerance

19 Buy Plan Management System Raw Material Purchase Order System Order Management and Supplier Communication Raw Materials Settlement and Payables Supplier Information Portal General Ledger Interface to Mill Financial System Freight Rate Data Base Management System Scale House Truck /Rail Transactions Processing Raw Materials and Home Scrap Inventory System Web Based Information Center Transaction Exception Auditing Mill / Supplier Transaction Interface Melt Shop Raw Material Management

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