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SteelLink Story SteelLink Story

TPT-WG27, 22-25 May 2006 Ha Noi, Viet Nam

Australian Case Study Presentation:

Partnership between three industry players to change business practices and better manage their rail capacity

SteelLinkSteelLink

Building a Partnership

BlueScope Steel Australian and New Zealand Industrial Markets

BlueScope Steel Australian Manufacturing Markets, and

BlueScope Lysaght.

BlueScope Steel has three main business units operating within Australia. These are:

The Patners: BlueScope Steel

Significant operations centre around the Port Kembla Steelworks and nearby Illawarra Coated Products.

Large production facilities also exist at Western Port Works (VIC) and at nationwide service centres, sales offices and roll forming facilities.

BlueScope Steel

The Partners: One Steel

OneSteel is the largest manufacturer of steel long products and is the leading metals distribution company in Australia, with revenues of three billion Australian dollars.

OneSteel has over 200 operational sites in Australia and New Zealand, more than 30,000 customers and employs approximately 7,400 people.

One Steel

OneSteel manufactures and distributes structural, rail, rod, merchant bar, cold finished bar, chrome plated bar, reinforcing, wire, tube, pipes, fittings, valves and actuation.

The majority of OneSteel’s products are used in the construction, manufacturing, housing, mining and agricultural industries.

The Partners: Pacific National

Pacific National is Australia's largest private rail freight business.

Operating in all states and the Northern Territory, Pacific National is a transport leader, delivering investment, innovation and growth in rail to provide the competitive answer for transport customers.

Pacific National

Customers benefit from a national focus and a competitive service.

Services include bulk freight (coal, grain, steel, ores), inter-modal containers (domestic and export), and specialised services such as express trains and the haulage of long-distance prestige passenger trains.

The Barrier – Existing Structure

In the 1990’s the steel industry faced significant performance challenges – increased global competition; a reduction in Australia’s steel tariffs; falling steel prices; and increased market share by foreign importers.

There was growing community pressure to reduce the number of trucks on the road around company facilities in Western Port, Whyalla and Newcastle.

The railways faced modal competition and pressures to cut cost and increase efficiency.

Reason for changing the business practice

The nature of competition had also changed for rail as trucks became the preferred mode for shipping the smaller parcels of product.

Pacific National (then National Corporation) came under pressure as it was losing market share to trucks and shipping was about to be privatised.

Steel makers around the world struggled to achieve economies of scale in production and the market was flooded with high volumes of steel.

The business settings that existed

OneSteel and BlueScope Steel are part of the global steel market. Their combined sales contribute $9 billion to GDP.

BlueScope Steel and OneSteel embarked on a strategy for market share:

- by supplying smaller steel parcels at shorter lead times;

- providing tailored solutions to meet customer requirements.

With an increase in truck usage, the transport costs blew out and truck capacity shortage reduced service levels to customers.

The process of change

To achieve the required improvements to their performance, BlueScope Steel, OneSteel and Pacific National all realised that they needed to change their relationship with suppliers and within their own businesses.

The partners adopted an end to end supply chain view of operations and combined their tonnes to maximise efficiencies and reduce costs.

Common performance measures were adopted to drive behavioural change and to achieve operational excellence.

The delivery of steel to both domestic and international users was being done in a safe, timely and cost effective manner.

SteelLink is one of Australia’s largest rail freight contracts worth more than $140 million pa.

The process of change (continued)

The SteelLink collaboration was driven by industry needs and the economics of conducting transport requirements.

SteelLink’s approach challenged traditional paradigms by focusing on how the companies could jointly extract more value from the supply chain by cost reductions and more efficient practices.

They changed the performance measuring systems to introduce incentives for changes in behaviour across participants in the supply chain and within the three companies.

How does it work?

The steel makers were interested in viewing their transport requirements from a supply chain perspective.

To achieve changes in the management of the supply chain, you need to seek a commitment from your own internal supply chain and your partners.

SteelLink got a commitment from its partner, Pacific National who realised a sense of involvement and ownership of the whole process.

All the players in this process embraced the concept and it improved the long-term performance of the companies and the supply chain as a whole.

SteelLink’s Distribution Task

Newcastle

Port Kembla

Western Port

Whyalla

SteelLinkSteelLink

Brisbane

Sydney

Melbourne

Adelaide

Perth

Figure 1

SteelLink’s Distribution Task

Figure 1 shows SteelLink’s distribution task.

Deliveries are made to customers directly where they have rail access, or to BlueScope Steel rail terminals in each capital city.

While each of the four steelworks were unique, the same set of performance measures applied and the methods for managing logistics and transport requirements were the same at each location.

Benefits of the SteelLink Partnership

PricesPrices

EfficiencyEfficiency

The new partnership has revolutionised the relationship between Pacific National and the two steel makers.

Figure 2: Butterbox for carrying steel coils

Benefits of the SteelLink Partnership

Terminal networkTerminal network – When the volumes are higher the terminals are financially more productive.

Market shareMarket share – The costs for rail are reduced which will result in an increase in the use of rail. This leads to savings which can then be reinvested.

TimetableTimetable – The railway is able to keep to the timetable and maintain delivery performance. Marketing and customer service staff can confidently state the location of the loaded product.

This new partnership is better positioned to respond to challenges now and in the future.

Benefits of the SteelLink Partnership

Third party businessThird party business – With the new partnership, savings and efficiency, the partners are well positioned to capture third party business.

High levels of service reliabilityservice reliability are attracting more freight to rail from road. Service reliability is nearing 100% on most corridors with well over 92% of steel delivered on time.

Benefits of the SteelLink Partnership

The outcome of the partnership has yielded great resultsresults for participants with up to three million tonnes of steel being shipped annually by Pacific National from the steelmakers manufacturing sites to other BlueScope Steel and OneSteel facilities, local customers and to ports for export.

The communitycommunity has benefited from the reduced number of trucks on the road resulting in increased safety and reduced pollution, congestion and noise; and

TaxpayersTaxpayers have benefited from the subsequent reduced need for road maintenance.

The Power of Collaboration

The SteelLink Partnership is an example of the power of collaboration and the removal of a previous business practice that was not successful.

It shows what can be achieved with suppliers and users of road transport services who are willing to work together to address issues that impact on safety, cost and efficiencies within each other’s organisations.

Details of this and other logistics innovation case studies can be found at http://www.ozlogistics.org