Original Date: 08/26/1996
Revision Date: 01/18/2007
Information : Supplier Management Process
In early 1996, Weirton Steel Corporation (WSC) implemented an extensive program to identify, analyze, and control purchased item costs. The program, referred to as the Supplier Management Process, consists of an eight-phase approach, each called a wave, which defines the WSC purchase item cost history and performs initial spend analyses of the highest cost items (spend buckets). Each spend bucket was further broken down into major cost subcategories to better define and localize cost drivers for corrective action. Figure 2-1 depicts the spend bucket breakdown for Electrical Parts and Supplies.
Once the spend bucket categories were identified, WSC charted spending for both the vendors involved and the mill areas affected (Figure 2-2). Price trends over time were also quantified. Detailed spend analyses were performed including WSC current sourcing strategy, current and future market trends, relationships with current suppliers, other ongoing WSC initiatives in the affected area, and other considerations. Further, vendor capabilities, quality, and service were rated by WSC. The company identified all cost drivers in each category under its all-in cost analysis process, including acquisition price; and logistics, delivery, transportation, handling, and in-house costs.
Cost baselines were established for each piece of equipment; areas of waste and inefficiency were identified; and comparisons of as-is and could-be costs were developed. Methods to reduce internal, supplier/customer and purchased item costs were then identified and charted on a problem-solving tree for each spend category. Next, WSC implemented actions to reduce its costs.
Although still early in the WSC Supplier Management Process, significant, tangible benefits have already been derived in some of the early action areas, such as rubber rollers and chemical purchases. A key element in the success of this program was the dedicated assignment of key members (100% of their time) to the WSC Supplier Management Process team. The company believes that, without the full-time dedication of the team members, the process would not have succeeded.
Figure 2-1. Initial Spend Analysis;
Figure 2-2. Vendor/Mill Area Chart
For more information see the
Point of Contact for this survey.