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Rail Challenges and Benefits with OTM

August 15, 2012 Debbie Baker, OmniSource

George Moser, Hitachi Consulting

Introduction to OmniSource

• Founded in 1943 • HQ in Fort Wayne, IN • Shipped over 6 million

tons in 2010 • Acquired by Steel

Dynamics (SDI) in 2007

• OmniSource buys and sells scrap metal, both ferrous and non-ferrous

• OmniSource places scrap containers in factories, buying the scrap from the factory; or buying the metal scrap from demolition sites

• The scrap is weighed, processed, shredded and sorted at OmniSource facilities

• OmniSource sells the ferrous scrap to its parent , Steel Dynamics, and other steel mills, where it is melted and converted into new steel

• The non-ferrous scrap, such as copper, is shredded and containerized and increasingly sent to China

Transportation at OmniSource

• 1800+ Private Railcars • 387 Outside Carriers • Barge operations • Export: 5000 TEUs/year • 80000 Shipments/month

• Independent Operator • 376 Drivers • 439 Power Units • 2143 Trailers • 10000+ containers

OTM Project Goals

• Unified transportation platform, intended to replace several legacy systems often divided by mode

• Proactive planning vs. post-activity recording • Carrier cost savings, better rate management,

automation and visibility/reporting company-wide • Rail-wise, ability to:

– Consolidate all rail rates and charges in one location – Enable EDI communication with Class 1 Railroads – Set the foundation for tracking demurrage in OTM in the future

Timeline

Phase 1: 2012 YTD

• JDE / OTM Go-Live in Toledo for TL and Rail • Rail Go-Live in the rest of OH

Phase 2: Q4 2012

• Transition to SAI • Midwest Go-Lives: TL and Rail in OH, MI, IN • CarrierWeb Go-Live

Phase 3: 2013

• Southeast Go-Lives: NC, VA, TN, GA, SC • Barge and Domestic Multi-Leg Moves • Nonferrous Division / Export Go-Live

Cars Handled By Omni Rail Annually

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2006 2007 2008 2009 2010 2011 2012 YTD

92,423 91,837 97,519 101,000 98,700 103,400 55,000

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2009 2010 2011 2012 YTD

Lease Costs $6,773,694 $7,675,101 $6,213,484 $4,362,674

Maintenance Costs $521,934 $760,050 $833,390 $548,178

Turn-In Costs $948,745 $139,679 $576,417 $143,496

# of PF Railcars in Fleet 1,326 1,654 1,842 1,830

PF Loads Annually 15,354 20,266 22,933 11,894

Total Moves Annually 101,000 98,700 103,400 55,000

# of Rail Employees

15 10 11 11

Omni Rail Private Fleet

Rail Operations Prior to OTM

PRIOR OTM…Omnisource’s TMS was Excel !

• Rate Maintenance & Inquiry

– Maintained a large Excel-based rate database. Records could be easily added, but not easily changed.

– Rates did not include additional charges such as FSC & lease costs

– Accessorials had to be added individually to each rate. Ex. If a switch charge changed, all rates using that switch had to be corrected one at a time.

– Marketing & Sales could not easily inquire to get an “all-in” rate. Lookups require manual addition of FSC & lease cost. Therefore, Rail Logistics spent unnecessary time manually preparing rate quotes.

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Rail Operations Prior to OTM

PRIOR to OTM…

• BOL Processing

– Creating Bills of Lading required users to visit each railroad’s website & learn the nuances of each web form.

– Training and documentation took considerable time due to the number of railroads that we utilize

– Users were required to trace all cars being billed to ensure the cars numbers (supplied by the scrap yards) were correct.

– Shipping information was rekeyed several times by different users at the yard and corporate levels

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Rail Operations Prior to OTM • Shipment Costs

– No visibility into total cost per shipment. Standard voucher was frequently

utilized to pay extra charges such at no-bills, trans-loading, and overloads. Since extra charges were often hidden in notes areas, there was no way to track these costs----without maintaining another spreadsheet.

• Freight Settlement – Invoice validation required manual lookup of the freight rate and the car

movement. This information came from multiple sources. Oftentimes, both the corporate freight auditor and the yard accounts payable clerk would perform these same tasks…aka big duplication of efforts.

• Railcar Tracking

– All tracking performed manually and maintained in spreadsheets. One FTE dedicated to railcar tracking alone.

– Duplications of efforts again, as yard specialists are also tracing the cars associated with their locations.

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Integration Overview

• Compliance DB based on Oracle APEX

• 2 ERPs: JDE and SAI

• EDI Partner: RMI • CarrierWeb links to In-

Truck Units

Scrap Yards

Order to Shipment Process

Order to Shipment Process

Yar

dO

TMM

arke

ting

Contract for XX Tons Scrap

Sales Order in ERP

Order Base

Load Rail car based on available

tons

Send Switch List to Rail Group

Create Order Release in OTM from Order Base

Plan Orders into Shipments

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Material is ready to

ship; Hardcopy Switchlist emailed to OmniRail

Material Order

releases created

BOL 404

created & sent to RR

Receive BOL

404 ack from RR

Planned Shipment

information sent to ERP

Actual weights received

from ERP

410 Invoice received from RR;

Auto-approved & voucher sent

to ERP

YARD OPS

CORP OMNIRAIL

ERP

OTM

RAIL PROCESS FLOW OVERVIEW

Benefits from OTM

BENEFITS OF OTM!

• Rate Maintenance & Inquiry

– Complete cost visibility: One source for rates including all costs: FSC, switch charges, etc

– RIQ will show best rate per itinerary for both private and public car rates

– Ability to differentiate Buy Side from Sell Side Rates (Lease and Maintenance Costs)

– Commodity & equipment-based rate inquiry supported

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Benefits from OTM Buy Side Rate

• Bu

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Benefits from OTM Sell Side Rate

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Benefits from OTM • BOL Process

– EASIER: The Bill of Lading process is simplified. There is now only one

place to enter BOLs. The learning curve for new employees has been greatly reduced.

– FASTER: Rail users no longer need to trace cars before billing, due to the automatic location verification and error handling between OTM and EDI provider.

– MORE EFFICIENT: Due to integration with the ERP system, we have reduced the need for the yard to release material from the material contract. Rail does it for them.

Once material is released, shipment built & tendered: – OTM sends the 404 transmission to the rail carriers via EDI Provider

– Validation of the 404 from the railroad via the EDI Provider is received with

an acceptance or rejection. OTM generates an email notification for the user.

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BOL Process

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Benefits from OTM • CLM’s (EDI 322)

– Released Loaded – Sets status to ENROUTE_ENROUTE – Constructive Placement – Sets status to ENROUTE_COMPLETE

– Actual Placement – Sets status to ENROUTE_COMPLETE if not

already set – Bad Order Status –

• Match to shipment or equipment • Match SPLC code to Rail Station Code • Update Rail Group with actual description

.

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Benefits from OTM BAD ORDER Status

.

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Benefits from OTM BAD ORDER Status – Match Rail Station

.

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Unit Train Capabilities

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Benefits from OTM • Unit Train Capabilities

– Weekly coal move (in the summer) from Hull, WV to Nuggett, MN

• Unit train from Hull, WV to Sandusky, OH • Port movement and storage in Sandusky, OH • Barge to Duluth, MN • Stevedoring in Duluth, MN • Unit train to Nuggett, MN

– Two dimensional unit break

• Per number of cars • Per ton per car

– Without OTM this is a manual process in a notebook (yes, a notebook)

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Benefits from OTM • Settlement

– All shipment costs are maintained in OTM for invoice matching…including

additional charges outside the original freight invoice.

– EDI 410 will streamline the invoice payment process by auto-approving those invoices within tolerance. The freight auditor will only have to handle the exceptions.

– OTM will provide more accurate and detailed reporting tools for financial

analysis

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OTM Rail Challenges • RIQ by Rate and Route only shows cheapest rate per

itinerary – At time of contract sales may not know the origin/destination

location

• Ability to create multiple releases out of the box from the order base – Current process is one release per car

• Railroad inconsistencies with city names – NS and CSXT may call the same location a different name – Columbus, MS = Arbela, MS

• Cumbersome switch absorption set-up and maintenance – Absorption cannot exceed total accessorials – Switch = $500, Absorption = $600

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Thank you!

George Moser Senior Manager – Supply Chain

www.hitachiconsulting.com

597 5th Ave, 11th Floor, New York, NY 10017 Phone: 864 787 7950 Email: gmoser@hitachiconsulting.com

Debbie Baker Business Analyst

www.omnisource.com

7575 W. Jefferson Blvd, Fort Wayne, IN 46804 Phone: 260 423 4193 Email: dbaker2@omnisource.com