Throughout the last five years, the mining and metals industry has faced a number of macroeconomic challenges and has been focused on implementing new technologies to provide significant cost control, cost management and enhanced optimization.
One of the oldest companies in the business, Schnitzer Steel Industries, Inc., is continuing to lead the way, establishing an impressive footprint, with approximately 100 locations spanning the US, Canada and Puerto Rico.
“We purchased roughly 400,000 end-of-life vehicles last year, from which we harvest parts and recycle through our platform. There’s a lot of opportunity that is tied to our purchases of automobiles, the overall economy and the replacement rate of automobiles,” explains Senior Director of Procurement Marcus Folino.
“We also have a variety of other programs and sources of metal supply, including appliances, manufacturing scrap and other local sources of construction-related recycling, for example. There's a lot of growth coming from many areas.”
By honing in on industry trends, Schnitzer Steel has gained essential foresight in the re-evaluation of its operational platforms to deliver consistent positive outcomes. By investing in its procurement capabilities, it has sought to transform its procurement function from one which is somewhat tactical, into one which is more strategic.
With past senior roles across manufacturing, logistics and strategic sourcing operations, Folino’s role as Director of Strategic Sourcing at logistics and transportation company Con-way (now part of XPO Logistics), fully opened his eyes to the potential that procurement can bring to organizations.
“At Con-way, I found myself rebuilding the strategic sourcing function that had already been created. Originally the focus was domestic, North American sourcing and later on, I worked with the international business and took the strategic sourcing function globally. It was a great opportunity and a good challenge, which led me to this role,” he says.
In order to transform the non-scrap procurement function into one which is increasingly strategic, Schnitzer Steel has placed significant emphasis on three main areas: its tools, its people and its processes to support the company’s ongoing strategy. Folino is nothing but complimentary about the team’s capabilities upon joining the organization, but outlines where Schnitzer Steel had opportunities to enhance its existing approach
“We had a solid and committed group of purchasing professionals at the business unit level. They possessed significant domain expertise in the mining and metals industry and substantial tenure within the Schnitzer business divisions. They already were a group of people that had a strong work ethic, which is really representative of our company's culture,” he says.
Schnitzer’s people have remained a key pillar in the company’s procurement transformation, and throughout the past three years, the firm has introduced essential change management, incorporating lean concepts and process improvement, as well as standardized existing processes and invested in multi-skilling its exceptional workforce.
“We invested in further training for the purchasing group, and I brought in additional talent with specific strategic sourcing, project management and contract management expertise. From a timing perspective, we decided to recruit the sourcing expertise from the market alongside investing to develop it internally,” adds Folino.
“One of the existing benefits to our organizational structure is that we maintained our purchasing staff co-located with the business. Consequently, there are many day-to-day working relationships which we continue to maintain and further develop.”
Working closely with its supply base, Schnitzer Steel has leveraged its spend to effectively manage potential risks, as well as invest in new digital tools across its complex procurement processes.
“We went through a very aggressive selection process with the focus on finding a platform supplier of procurement tools. From here, we implemented a contract management system and another module of this application to manage supplier data. While we were evaluating the supply base, we were running request for proposals (RFPs) and signing contracts,” Folino explains.
“We went from an environment where the spend under contract was managed with limited procurement tools or systems, to one where we had a formalized policy, a procurement platform and a focus on contract management. Today, we have around half of our total spend under contract.”
By implementing a supplier management program within the first few months of its procurement transformation, Schnitzer Steel has also harnessed the capabilities of strategic suppliers to drive the consolidation of its supply base, reducing the number of suppliers by about half.
“We segmented our supply base and those suppliers that we could develop by applying specific evaluation criteria. We also identified the suppliers that we could target for consolidation. Through a rigorous process, we determined what our current supply base in each of our core areas of spend would be,” explains Folino.
“We learned more about our suppliers, enhanced communication, and then managed their ability to execute,” he continues.
“This whole process has been invaluable. Once we established the basic mechanics, we continued to integrate key internal stakeholders to help guide the direction of the services and goods that suppliers are providing.”
Aligned with its objective to grow the volume of materials processed through its platforms going forward, Schnitzer Steel is leveraging new technologies to deliver faster, more efficient, effective support across its procurement operations.
“This year we have been seeing the benefits of the past few years of our purchasing and procurement transformation,” says Folino.
“One area we are now looking into is supplier diversity programs. This has been rolled into part of our ‘Know Our Supplier’ efforts. As we've implemented new technologies, we're starting to capture better information on our supply base, which is now moving towards a supplier self-service model.”
One of Schnitzer Steel’s goals is to drive increased volumes through its current footprint, whilst looking at ways to further its ambition to deliver sustainable working practices which benefit customers, suppliers, our people and the communities which we serve.
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