e i p m annual conference. the expectations of arcelor · e i p m annual conference. the...
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E I P M Annual Conference.The expectations of ARCELOR
December 1rst, 2005
J. CHARDONSenior VP Industrial Services
ARCELOR PURCHASING
2004, a year of expansionInternationalisation is one of the main platforms supporting thedevelopment of Arcelor. In 2004, with the acquisition and consolidation of Acindar and CST, Arcelor became the number one steel group in Latin America.
Argentina
Arcelor holds 73% of Acindar capital.
Brazil
Arcelor holds 73% of capital and consolidates CST.
Operations begin at Vega Do Sul factory
India
Joint-venture with the Indian group Jindal to create a company that specialises in the production of precision laminates.
China
Joint venture with Baosteel and Nippon Steel for automotive products.
Joint venture with the Korean company Kiswireto construct a 2nd wire drawing plant.
Great Britain
Repurchase of sheet pile commercial activity at Corus
Belgium
Start of construction of Charleroi electric steel plant (€ 240 Minvestment)
Andean zone/Central AmericaLCS/ FCS acquisition
(downstream Brazil, etc.)
IndiaSlabs plant investigation
TurkeyComplete European
scheme with Erdemir
Russia/UkrainePartner or acquisition
in Flat Carbon andLong Carbon China
Several long and flat carbon contacts for stake
acquisition in existinggreenfield companies or
projects– with Chinese partners
Market opportunity
Semis competitiveness
The ARCELOR Group growth strategy
NaftaAutomotive presence
Downstream operations for CSTEntry of A3S
South America/BrazilInternal organic growth
of Arcelor companiesNew slabs capacity
Entry of A3S
Distribution of turnover 2004
Turnover by sector (in millions of euros) Total: 30.176 billion euros
Turnover by geographical zone
Flat carbon steel
A3S
Long carbon steel
Stainless steel
16 139
8 267
6 221
4 577
53.5%
27.4%
20.6%
15.2%
South America 7.1%
North America 7.6%Europe 77.5%
Rest of world 7.8%
Arcelor,leader of the worldwide steel industry transformation
Turnover
Production
Gross operational result
Net result (group)
Employees
: 30 billion euros
: 47 million tonnes of steel
: 4,341 million euros
: 2,314 million euros
: 95,000 people in more than 60 countries
Key figures 2004
ARCELOR's ambition
ImproveEBITDA
2,000 Million 2,000 Million €€
In 3 yearsIn 3 years
By focusing on greater efficiencyBy focusing on greater efficiency
Objective 2005: to pursue the strategy of a global player
The group will pursue external growth by targeting first and foremost those regions in the world offering the greatest development potential. Priority will be given to expansion in countries within the BRIC zone: Brazil-Russia-India-China
The stated objective is to increase the Group's presence in these countries to 50% of turnover, compared with the current 23%.
Factors supporting this growth will include Arcelor'sambitious commercial policy together with the offer of innovative steel solutions.
ARCELOR PURCHASING
ENERGY TRANSPORT & LOGISTICS
J.L. SANCHEZ
INDUSTRIAL PRODUCTS
J.M. DECRUYENAEREPh. CARON
RAW MAT.O. DUBREUIL
A. GARCIA
SCRAPY. SCHRAUBF. BARONE
HUMAN RESOURCESD. de ROTALIER
QUALITY AND INFORMATION SYSTEMS
S. DELFANNE
INVEST and ITD. VACHER
LOGISTICS AND INTERNATIONAL DEVELOPMENT SUBSIDIARIES
D. FRANCON
GLOBAL ALLIANCEJ. LLERA
MANAGERARCELOR PURCHASING
A. BOUCHARD
MANAGEMENT CONTROLPh. BIQUILLON
INDUSTRIAL SERVICES
J. CHARDONG. BECKERS
STRATEGYY. KOEBERLE
J.P. REBOUL
AP: 200Of which AP PARIS : 60
LOCAL : 600TOTAL : 800
TURN
GUARANTEED TURNOVER: 16 billion €/year
MANAGEMENT MONITORING
Ph. BIQUILLON
How we are managed
Our challenge"Improve the efficiency of our purchasing and procurement processes"
- AP. Priorities for action in 2004 -
CUSTOMERS
How we manage
SUPPLIERS
Supplier Management
HOW WE CAN IMPROVE THE WAY WE MANAGE RELATIONSHIPS WITH OUR SUPPLIERS
T/O, ARCELOR market share
Safety, environment, technical, commercial
and financial expertise, service-orientated,
continuous progress Availability, quality, dependence in relation to ARCELOR, financial well-being
Supplier Management
Information sharing in ARCELOR
Added value
OP2Supplier
Management
OP2Supplier
Management
OP2Measure of value created/destroyed
Market participation by
supplier in ARCELOR
Supplier performance Risk
analysis
OP4
OP4
SupplierMonitoring
OP2
OP2
Market, strategy, products, cost structure, sustainable
development, etc.
SupplierKnowledge
Technical, economic, geographical
Supplier competence
OP2
OP2
INDUSTRIAL SERVICES
Category Manager (CM)
Reporting, Statistics and Administration
0.9 E. Malis G.Dey1
J. Chardon1
G. Beckers
Category Mgr Asst. (CMa)
1
Admin Assistant (AS)
0,2 M. Wouters
Fleet managementTravel
1 Ph. BergerA. Ruffin
Industrial operations (LB)
Industrial servicesMaintenance (LB)
G. Amann
Financial/legal support (AN)
1 S. Villard
Marketing Suppliers
D. Butgen0,5
Operations Vega
J. Chardon
P. Vidal
Trans activities(LB)
1 1
Multiservice projects (LB)
S. Laleu0,7
CM
LBGBANFSAS
Category Manager/DeputyLead BuyerGlobal Buyer/BuyerAnalyst/Buying Ass.Functional SupportAdministr. Assist
Maintenance services (LBa)
Ph. Pilière1
Benchmark
(GB)
L.O. Coudeyre0,2
1
€ 0.15 B € 0.4 B€ 1.2 B
€ 0.2 B
€ 0.6 B
€ 2.55 billion/year
INDUSTRIAL SERVICES
One of the 7 departments within ARCELOR PURCHASING
18 buyers + 3 support positions
6 nationalities
6 different geographical locations
Annual GOM: € 35 million/year2 million €/year and per FTE€ 40 K/week
Coaching and involvement in local management
100 projects currently being researched
INDUSTRIAL SERVICES
Breakdown into sub-categories:Acid regenerationWater treatmentDomestic transportHarbour operationsUtilities managementScrap yard operationsTreatment of slag from blast furnace and steel worksRefractory servicesPackingChromium plating and cylinder grindingTreatment of slabs: repairing cracks, oxygen cutting, etc.Treatment of waste: ordinary and technicalDust and fumesSocial building and industrial cleaningGlobal contracts: caretaking, industrial lifts, transformers, etc.MaintenanceTemp.Etc…..
Each buyer is responsible for at least 2 sub-categories
Essential technical training
INDUSTRIAL SERVICES
CORPORATE thinking on ARCELOR core business
Our thinking is cross-sector within an "industrial basin" logic
As regards the nature of the steel industry, we constantly have to strike a balance between being competitive in the short term whilst maintaining relationships for the long term
Sub-contracting/outsourcing policy required to create value and not just to sustain it (training, recruitment, supply of investment)
Highly specific purchasing process aimed at greater professionalism:Project method: KO meeting, BP, Make or Buy analysis, Risk analysis, Award contract
Technical and financial training essential for buyers with strictly commercial competence being less important
Active involvement in the Group's transformation
INDUSTRIAL SERVICES - OBJECTIVES
Generalisation of PROJECT method: But with the obligation to achieve an initial result within 3 monthsPromote joint projects with Investment Purchasing and IndustrialProducts departments: outsourcing, MRO, items made to measure, etc.Duplication of “Best practices”Development of benchmarks with industries outside the steel industryPragmatic sourcing in countries with lower costsEUROPE will remain as our action zone for some time to comeBuyer involvement in drawing up specifications through to awarding contractsParamount importance of safety
INDUSTRIAL SERVICES - TOOLSTotal involvement regarding scope definitionBusiness Plan"Make or Buy" analysisRisk analysisContract monitoring performance chartSummary contract for signatureKey Performance Indicators (KPI)
OP1 : STRATEGYOP2 : SUPPLIER MANAGEMENTOP3 : NEGOTIATIONOP4 : AWARD
Development of ratios
NEGOTIATION BECOMES SECONDARY
ACTION BY THE BUYER DOES NOT CEASE UNTIL THE CONTRACT IS AWARDED
INDUSTRIAL SERVICES -CHARACTERISTICS
We are working for the long term: from 3 to 15 yearsWe are seeking added value for the long termThe jobs we have are similar to those of our suppliers: because of cultural differences between the different companies within the Group, we often find it difficult to "sell" a contract, even if we bring all competencies into one project teamWe do not always precisely determine production data
IN CONCLUSION, FOR THE LONG TERM WE ARE LOOKING TO:CREATE VALUEBE FLEXIBILEBE COMPETITIVE
All this is in return for a long-term contract and a suitable saving
AND THISAND THIS
In a fully developing context of:In a fully developing context of:
Restructuring the 4 ARCELOR sectorsRestructuring the 4 ARCELOR sectors
Group growth:Group growth: 100 million tonnes of 100 million tonnes of steelsteel
EXPECTATIONS VIS-A-VIS SUPPLIERSSupplier's right to interfere outside the strict scope of the service with profit-sharing system Development of progress contract against a balanced mechanism for profit sharingA flexibility that extends to the notion of modularity for a given periodAn irreproachable policy in matters of hygiene and safetyManagement by objectives shared by HRTransparencyActive contribution towards simplifying processesAdherence to a method of negotiation resulting in permanent agreements:Coverage of costs + margin linked to risks taken by partner + management of progressConsultancy role when drawing up the specifications for an activityWe analyse supplier performance at a number of levels: contract, site, industrial scope, ARCELOR scope. You have a duty of global performance
In return:Ethical charter signed by the buyer:
Undertaking not to use the ideas provided by the supplier throughout the purchasing process
Duty of informationRespect for economic conditions: WCR, indexationDuty of explanation in the event of an invitation to tender
being lostEquitable profit sharing to maintain high motivationPre-negotiated clauses for immediate application for all
contractsResponsibility assumed by ARCELOR in the event of
unilateral breach of contractStricter verification of project basicsGuarantee by ARCELOR in the event of prolonged mobilisation of supplier teams or particular research