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OUTOKUMPU

Supply Chain Management
by

Kate Lewis

on 18 December 2013

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Transcript of OUTOKUMPU

17143 tonnes
DESIGNING A GLOBAL SUPPLY CHAIN NETWORK
WHAT'S IN THE PRESENTATION?
GLOBAL SUPPLY CHAIN PLANNING
CONCLUSION
Global Supply Chain for
Long Products
Critical Analysis of their
Sales and Operations Planning
– Information systems (financial, marketing and supply chain planning)
– Organizational processes
– Personal responsibility and accountability

Sales and operations planning is an integrated combination of;
Using this combination, the operations and sales departments must overcome conflicts to develop consensus and then execute their collaborative plans to keep factory costs down to a minimum
Managing
Supply
Capacity
Inventory
Managing
Demand
Forecasting to ensure enough capacity
Short term - Promotions
Long term - Strategic incentives?
Challenges Facing Outokumpu:
Time flexibility from workforce -
12 hour shifts - employees choose own working hours
= allows Outokumpu to better match production with demand, allowing production to be more easily manipulated, lowering inventory costs and gaining employee loyalty
Capacity:
Plant in full production for 2 weeks - then 3 day repair period
= ensures machines are not over-run and increases availability of flexible production capacity
Plant Capacity -
Waste Management -
Inventory:
3 main product types in production process, all with different levels of demand
= certain products are more highly specialised than others and will not flow through production as efficiently
Runners + Repeaters + Strangers
Forecasting Orientated
= loss of several hundred tonnes of RMs during production
= less customer focused during production but allows product to be optimised to highest level
= allows Outokumpu to recognise their PoPE and control decoupling points - essential in the upstream longevity of the supply chain
Forecast for Outokumpu's Demand December 2014
Using a three month moving average and mean standard deviation vs. exponential smoothing
Outokumpu analyse forecasts with 24 month sales data every 3-6 months
= allows them to identify trends, seasonality and points of stability
Predictable Variability -
A change in demand that can be forecasted
Take into account when making strategic decisions
Ensure plans are made according to reality of change
Always pre-empt PV
Aggregate Planning
A process by which a company determines planned levels of:
Capacity
Production
Subcontracting
Inventory
Stock-outs
Pricing
Trade-off Capacity
Chase Strategy
Aggregate Planning Strategies
Trade-off Utilisation
Flexibility Strategy
Trade-off Inventory
Level Strategy
High inventory holding costs - £2m per day
Outokumpu - Hybrid Strategy
Disparate Systems Category - Differentiation
Flexibility configurations
V-Plant - 'One-to-Many' manufacturing facilities
Processes split internationally across plants

Developed market
Local suppliers
Historic infrastructure
Local skill set
Greater focus on customer orientation...
Greater personalisation of product to consumer market and customer needs could be a competitive advantage and margin gain
Indicate possible trends and would also help in forecasting in long term instead of using capital intensive programs
* Cost is at the heart of every stage of the supply chain - could production and inventory cope?
13,750 USD Nov per tonne
Long Products - Chained Network
Partial Flexibility (Jordan and Graves, 1995)
Fully flexible inhibitively expensive
Varying demand can be transferred within LPs
December=
one operational shutdown week
two operational shutdown weeks
18,500 USD Jan --> 13,500 USD Jul per tonne
Three point moving average = 20017 tonnes
Three point moving average smoothing = 18103 tonnes
Mean squared deviation = 17143 tonnes
Mean squared deviation smoothing = 11363 tonnes
Phase I
Competitive Strategy
Pre-existing infrastructure in Sheffield
Global Competition
Internal Constraints
Capital constraints of re-establishment
Existing Network
Phase II
Competitive Environment
Local region
RECOMMENDATIONS
Aggregate Factor/Logistics Costs
Low local logistic costs, developed infrastructure
Tariffs and Tax Incentives
EU
Regional Demand - Sheffield
Political
Phase III
Production Methods
Skills needed
Local market skills necessary and training for long-term aggregate planning
Low turnover
Response time
Facilities difficult to replicate elsewhere, speed of production limited to plant
Only structural adjustments in supply chain can improve efficiencies
Available Infrastructure
Well-developed infrastructure across supply-chain
Variation of product lines
Dependent process operations
Phase IV
Factor Costs
Logistics Costs
Market and Supply Allocation
Lack of production plants in APAC but higher quality commands premium prices compared to domestic products

CONTENTS
1. Global Supply Chain Planning
2. Aggregate Planning
3. Sales and Operations
4. Network Design Framework
5. Flexibility Configurations
6. External Analysis
7. Conclusions + Recommendations
Outokumpu's Long Products
POINT OF PRODUCT EXPLOSION
Regional Markets served by factories
US + European markets are key due to proximity
Supply of raw and scrap materials in established networks
Local, International

Labour - Low staff turnover in Sheffield
History of training, skilled local pool
Materials - historical links with scrap, raw imported (higher costs)
Site-specific - cost of shutdown, but size and age of plant minimises cost in expansion (relocating unviable)
Logistics costs - transport, inventory, coordination
Transport (scrap, etc low but high between international plants)
Inventory costs very high (£2m per day)
Coordination inside EU is cheaper due to export cost reduction but not ideally situated due to proximity
US plant inconvenient but necessary for market
SUMMARY
How we believe the Supply Chain can be improved
Expansion
Potential Off-Shoring to China, Russia or India
Increased demand for quality compared to domestic produce
Joint-venture
Bottleneck
AOD Converter
Constant Heating System
Automated Alkaline Machine
Filtering Raw Materials before melting - 80%
Strategy
Outokumpu transition from Chase/Level strategy
Technology Advance to overcome Bottleneck
Less Inventory - Greater Flexibility in production
Location
Models Unrealistic
Relocation of Plants can be unfeasible
New Plant Potential Location
De-Coupling Point
Increased Differentiation:
Chase Strategy - £2m daily
Multifunctional Cooperation for effective strategies
Forecasting
Flexible working hours
Existing Infrastructure & Reputation
Market Trends
Access to EU
Expansion to the NAFTA
Move the De-Coupling point further upstream
Keep Runners but increase Repeaters
Full transcript