10 KIRPS

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GEORGES KIRPS, VICE PRESIDENT EUROMETALGEORGES KIRPS, VICE PRESIDENT EUROMETAL

THE ROLE OF STEEL TRADE & STEEL LOGISTICS THE ROLE OF STEEL TRADE & STEEL LOGISTICS IN BUSINESS MODELS FOR STEEL DISTRIBUTIONIN BUSINESS MODELS FOR STEEL DISTRIBUTION

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THE ROLE OF STEEL TRADE & STEEL LOGISTICS IN BUSINESS MODELS FOR STEEL DISTRIBUTIONGEORGES KIRPS, VICE PRESIDENT EUROMETALTHE ROLE OF STEEL TRADE & STEEL LOGISTICS IN BUSINESS MODELS FOR STEEL DISTRIBUTIONGEORGES KIRPS, VICE PRESIDENT EUROMETAL

ADAM SMITH IS ALIVE: THE RATIONALE OF INTERNATIONAL TRADEADAM SMITH IS ALIVE: THE RATIONALE OF INTERNATIONAL TRADEADAM SMITH IS ALIVE: THE RATIONALE OF INTERNATIONAL TRADEADAM SMITH IS ALIVE: THE RATIONALE OF INTERNATIONAL TRADE

With International Trade

• Increased competition.Increased competition.• Economies of scale.Economies of scale.• Specialization.Specialization.• Lower prices.Lower prices.• Interdependencies.Interdependencies.

Without International Trade• Small national markets.Small national markets.• Limited economies of scale.Limited economies of scale.• High prices and near High prices and near monopoly.monopoly.• Limited product diversity.Limited product diversity.• Different standards.Different standards.

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SuezHormuz

PanamaMalacca

Bosporus

Magellan

Good Hope

Gibraltar

Bab el-Mandab

MARITIME LOGISTICSMARITIME LOGISTICSMARITIME LOGISTICSMARITIME LOGISTICSARE A CORNER STONE IN INTERNATIONAL TRADEARE A CORNER STONE IN INTERNATIONAL TRADEARE A CORNER STONE IN INTERNATIONAL TRADEARE A CORNER STONE IN INTERNATIONAL TRADE

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Manufacturing Base

Core BaseDistributionLogistics Marketing / RetailR&D

DISCONNECTING PRODUCTION AND DISTRIBUTIONDISCONNECTING PRODUCTION AND DISTRIBUTIONDISCONNECTING PRODUCTION AND DISTRIBUTIONDISCONNECTING PRODUCTION AND DISTRIBUTIONIS THE KEY DRIVER OF INTERNATIONAL STEEL TRADEIS THE KEY DRIVER OF INTERNATIONAL STEEL TRADEIS THE KEY DRIVER OF INTERNATIONAL STEEL TRADEIS THE KEY DRIVER OF INTERNATIONAL STEEL TRADE

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Industrial Pole Flows of rolled steels Flows of raw materials

INCREASING INTERDEPENDENCE OF WORLD ECONOMIC REGIONSINCREASING INTERDEPENDENCE OF WORLD ECONOMIC REGIONSINCREASING INTERDEPENDENCE OF WORLD ECONOMIC REGIONSINCREASING INTERDEPENDENCE OF WORLD ECONOMIC REGIONSCHANGES IN GLOBAL STEEL TRADE:CHANGES IN GLOBAL STEEL TRADE:CHANGES IN GLOBAL STEEL TRADE:CHANGES IN GLOBAL STEEL TRADE:

After 1970

Developed Countries

Emerging Countries

Before 1970

Developed Countries

Emerging Countries

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INTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADE

StageStage NatureNature FunctionFunction

Until the 1970s Immobile factors of production

Cope with scarcity

Late 20th century Mobility of factors of production

Promote economic efficiency

Early 21st century Global production networks

Added value within commodity chains

GLOBAL ENVIRONMENT IS CHANGINGGLOBAL ENVIRONMENT IS CHANGINGGLOBAL ENVIRONMENT IS CHANGINGGLOBAL ENVIRONMENT IS CHANGING

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Immobile Factors of ProductionImmobile Factors of Production

Bulk point-to-point

Country A

Country B

Before 1970s

Mobility of Factors of ProductionMobility of Factors of Production

Container shipping

1970s – 1990s

Global Production NetworksGlobal Production Networks

Global

Market

Com

modity

Market

1990s onward

Commodity chain

THE GLOBAL TRADE ENVIRONMENT IS CHANGING:THE GLOBAL TRADE ENVIRONMENT IS CHANGING:THE GLOBAL TRADE ENVIRONMENT IS CHANGING:THE GLOBAL TRADE ENVIRONMENT IS CHANGING:FROM BULK POINT-POINT-TO-POINT TOWARDS COMMODITY CHAINSFROM BULK POINT-POINT-TO-POINT TOWARDS COMMODITY CHAINSFROM BULK POINT-POINT-TO-POINT TOWARDS COMMODITY CHAINSFROM BULK POINT-POINT-TO-POINT TOWARDS COMMODITY CHAINS

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Free trade between members: NAFTA,Mercosur, ASEAN (partial)

Free Trade

Common external tariffsCustoms Union

Factors of production move freelybetween members

Common Market

Common currency, harmonized taxrates, common monetary and fiscalpolicy: EU (partial)

EconomicUnion

Sharing common legal, fiscal

and financial framework

PoliticalUnion

Leve

l of i

nteg

ratio

n

Complexity

ECONOMIC INTEGRATION IS A STRONG ENABLERECONOMIC INTEGRATION IS A STRONG ENABLERECONOMIC INTEGRATION IS A STRONG ENABLERECONOMIC INTEGRATION IS A STRONG ENABLERFOR FREE TRADE OPERATED COMMODITY CHAINSFOR FREE TRADE OPERATED COMMODITY CHAINSFOR FREE TRADE OPERATED COMMODITY CHAINSFOR FREE TRADE OPERATED COMMODITY CHAINS

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Transaction costs

SUPPLY CHAINS IN INTERNATIONAL STEEL TRADE:SUPPLY CHAINS IN INTERNATIONAL STEEL TRADE:SUPPLY CHAINS IN INTERNATIONAL STEEL TRADE:SUPPLY CHAINS IN INTERNATIONAL STEEL TRADE:OPTIMIZING THE FOUR TEESOPTIMIZING THE FOUR TEESOPTIMIZING THE FOUR TEESOPTIMIZING THE FOUR TEES

Tariff and non-tariff costs

Transport costs

Time costs

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FREIGHT COSTS ARE A TOP ISSUE IN TOTAL IMPORT COSTSFREIGHT COSTS ARE A TOP ISSUE IN TOTAL IMPORT COSTSFREIGHT COSTS ARE A TOP ISSUE IN TOTAL IMPORT COSTSFREIGHT COSTS ARE A TOP ISSUE IN TOTAL IMPORT COSTSFREIGHT COSTS FOR IMPORTS IN WORLD TRADE (% OF TOTAL COSTS)FREIGHT COSTS FOR IMPORTS IN WORLD TRADE (% OF TOTAL COSTS)FREIGHT COSTS FOR IMPORTS IN WORLD TRADE (% OF TOTAL COSTS)FREIGHT COSTS FOR IMPORTS IN WORLD TRADE (% OF TOTAL COSTS)

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SHARE OF CONTAINERIZED CARGO IN GLOBAL TRADE, 1980-2000SHARE OF CONTAINERIZED CARGO IN GLOBAL TRADE, 1980-2000SHARE OF CONTAINERIZED CARGO IN GLOBAL TRADE, 1980-2000SHARE OF CONTAINERIZED CARGO IN GLOBAL TRADE, 1980-2000SINCE 1980, CONTAINERS HAVE GAINED TOP MARKET SHARESINCE 1980, CONTAINERS HAVE GAINED TOP MARKET SHARESINCE 1980, CONTAINERS HAVE GAINED TOP MARKET SHARESINCE 1980, CONTAINERS HAVE GAINED TOP MARKET SHARE

0

100

200

300

400

500

600

700

800

1980 1985 1990 1995 2000

Mill

ion

tons

Containerized Cargo

Other General Cargo

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INTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADEINTERNATIONAL STEEL TRADETRIGGERS INTERNATIONAL STEEL TRANSPORT CHAINSTRIGGERS INTERNATIONAL STEEL TRANSPORT CHAINSTRIGGERS INTERNATIONAL STEEL TRANSPORT CHAINSTRIGGERS INTERNATIONAL STEEL TRANSPORT CHAINS

A BOrigin Destination

International Steel Trade

Trade barrier

Rail

Steel Transport Chain

Maritime Road

Transshipment

A B

Producer Processor

Customs

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Co

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um

ers

Producers Distributors

CollectorsRecyclers

Forward ChannelReverse Channel

Su

pp

liers

FORWARD AND REVERSE STEEL INTERMEDIATION TO COME ?FORWARD AND REVERSE STEEL INTERMEDIATION TO COME ?FORWARD AND REVERSE STEEL INTERMEDIATION TO COME ?FORWARD AND REVERSE STEEL INTERMEDIATION TO COME ?

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GatewayGatewayInland Inland

TerminalTerminalDistributionDistribution

CenterCenter

CorridorCustomerCustomer

“Last Mile”

Segment

GLOBALGLOBAL HINTERLANDHINTERLAND REGIONALREGIONAL LOCALLOCAL

Shipping Network

Capacity

Frequency

MassificationMassification AtomizationAtomization

ARE IMPACTED BY THE “LAST MILE” IN PHYSICAL DISTRIBUTIONARE IMPACTED BY THE “LAST MILE” IN PHYSICAL DISTRIBUTIONARE IMPACTED BY THE “LAST MILE” IN PHYSICAL DISTRIBUTIONARE IMPACTED BY THE “LAST MILE” IN PHYSICAL DISTRIBUTIONSTEEL DISTRIBUTION BUSINESS MODELSSTEEL DISTRIBUTION BUSINESS MODELSSTEEL DISTRIBUTION BUSINESS MODELSSTEEL DISTRIBUTION BUSINESS MODELS

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MARKET MODELMARKET MODELMARKET MODELMARKET MODEL

STEELMAKER MODELSTEELMAKER MODELSTEELMAKER MODELSTEELMAKER MODEL

HIGHHIGHVOLUMESVOLUMES

LONGLONGRUNSRUNS

ECONOMIESECONOMIESOF SCALEOF SCALE

DISTRIBUTION, SERVICE AND SUPPLY CHAINSDISTRIBUTION, SERVICE AND SUPPLY CHAINSDISTRIBUTION, SERVICE AND SUPPLY CHAINSDISTRIBUTION, SERVICE AND SUPPLY CHAINS

SMALLERSMALLERORDERSORDERS ADDITIONALADDITIONAL

PROCESSINGPROCESSING INCREASINGINCREASINGCOMPLEXITYCOMPLEXITY SHORTERSHORTER

LEADTIMESLEADTIMES SERVICESERVICEAND VALUEAND VALUE

RAPIDRAPIDRESPONSERESPONSE DELIVERY REQDELIVERY REQ

FLEXIBILITYFLEXIBILITY

BETWEEN STEEL PRODUCERS AND STEEL CONSUMING INDUSTRIESBETWEEN STEEL PRODUCERS AND STEEL CONSUMING INDUSTRIESDISTRIBUTION IS THE INTELLIGENT MATCHMAKERDISTRIBUTION IS THE INTELLIGENT MATCHMAKERDISTRIBUTION IS THE INTELLIGENT MATCHMAKERDISTRIBUTION IS THE INTELLIGENT MATCHMAKER

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CONSEQUENTLY DIFFERENT BUSINESS MODELS WILL ALSO ASK FOR CONSEQUENTLY DIFFERENT BUSINESS MODELS WILL ALSO ASK FOR A DIFFERENTIATION REGARDING THE DEFINITION OFA DIFFERENTIATION REGARDING THE DEFINITION OF

STRATEGIC MARKET POSITIONINGSTRATEGIC MARKET POSITIONINGOPERATIVE BUSINESS PROCESSESOPERATIVE BUSINESS PROCESSESFINANCIAL INVESTMENTS IN ASSETS AND KNOW HOWFINANCIAL INVESTMENTS IN ASSETS AND KNOW HOW

STRATEGIC MARKET POSITIONINGSTRATEGIC MARKET POSITIONINGOPERATIVE BUSINESS PROCESSESOPERATIVE BUSINESS PROCESSESFINANCIAL INVESTMENTS IN ASSETS AND KNOW HOWFINANCIAL INVESTMENTS IN ASSETS AND KNOW HOW

PROXIMITY BUSINESSFOCUSED ON SERVING REGIONAL / LOCAL MARKETSPROXIMITY BUSINESSFOCUSED ON SERVING REGIONAL / LOCAL MARKETS

SUPPLY CHAIN BUSINESSFOCUSED ON INTEGRATING INTO VALUE ADDED NETWORKSSUPPLY CHAIN BUSINESSFOCUSED ON INTEGRATING INTO VALUE ADDED NETWORKS

MARKET SUPPLY BUSINESSFOCUSED ON MATERIAL SOURCING AND HANDLINGMARKET SUPPLY BUSINESSFOCUSED ON MATERIAL SOURCING AND HANDLING

MARKET FUNCTIONALITIES AFFECT BUSINESS MODELSMARKET FUNCTIONALITIES AFFECT BUSINESS MODELSMARKET FUNCTIONALITIES AFFECT BUSINESS MODELSMARKET FUNCTIONALITIES AFFECT BUSINESS MODELS

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PST1 PST2 PST4PST3

P 3P 2P 1

CST1 CST2

OU

TB

OU

ND

IN

TER

NA

L IN

BO

UN

D

ASpecialised

Central Stocks feeding

Proximity Stocks

BFull Range Central Stocks linked to

Dispatching Points

CSpecialised

Central Stocks linked to

Dispatching Points

P 3P 2P 1

DP1 DP2 DP20DP8

CST1 CST2

.. ..

P 3P 2P 1

DP1 DP2 DP20DP8

CST1 CST2

..

ALTERNATIVE BUSINESS MODELSALTERNATIVE BUSINESS MODELSALTERNATIVE BUSINESS MODELSALTERNATIVE BUSINESS MODELSREQUIRE ALTERNATIVE LOGISTIC MODELS . . . .REQUIRE ALTERNATIVE LOGISTIC MODELS . . . .

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Shuttle Freight

Liner Freight

Consolidate Freight

Milk-Run-Freight

. . . . LEADING TO ALTERNATIVE FREIGHTING STRATEGIES. . . . LEADING TO ALTERNATIVE FREIGHTING STRATEGIES. . . . LEADING TO ALTERNATIVE FREIGHTING STRATEGIES. . . . LEADING TO ALTERNATIVE FREIGHTING STRATEGIES

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ISSUES AT STAKE• Reduce logistics costs• Improve customer service • Synergies by clustering freight volumes

• Reduce idle return freights • Think in larger economic spaces

As is-Situation

Legend

ProductionHarbourProducer AProducer BProducer A+BProducer C

Optimising freights

LegendProductionHarbourHub

OPTIMISATION OF THE FREIGHTING NETOPTIMISATION OF THE FREIGHTING NETOPTIMISATION OF THE FREIGHTING NETOPTIMISATION OF THE FREIGHTING NETIS A KEY ISSUE IN STEEL DISTRIBUTIONIS A KEY ISSUE IN STEEL DISTRIBUTION

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Optimising Customer Boundaries

OPTIMISED FREIGHTS LEADS TO NEW CUSTOMER BOUNDARIESOPTIMISED FREIGHTS LEADS TO NEW CUSTOMER BOUNDARIESOPTIMISED FREIGHTS LEADS TO NEW CUSTOMER BOUNDARIESOPTIMISED FREIGHTS LEADS TO NEW CUSTOMER BOUNDARIESAND TO NEW CHALLENGES IN THE SALES ORGANISATIONAND TO NEW CHALLENGES IN THE SALES ORGANISATION

Optimising freights

LegendProductionHarbourHub

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THE ULTIMATE LOGISTIC & FINANCIAL CHALLENGETHE ULTIMATE LOGISTIC & FINANCIAL CHALLENGETHE ULTIMATE LOGISTIC & FINANCIAL CHALLENGETHE ULTIMATE LOGISTIC & FINANCIAL CHALLENGE

ADDED VALUE POTENTIALS ALL ALONG THE SUPPLY CHAINADDED VALUE POTENTIALS ALL ALONG THE SUPPLY CHAIN

CONSUMPTIONCONSUMPTIONPRODUCTIONPRODUCTION

CAPITAL EMPLOYEDCAPITAL EMPLOYED

DISTRIBUTIONDISTRIBUTION

ADDED VALUE =ADDED VALUE =OPTIMISATION OF STOCKS AND THEIR TURNOVER THROUGH OPTIMISATION OF STOCKS AND THEIR TURNOVER THROUGH A SINGLE LOGISTIC NETWORK OF ALL STAKEHOLDERSA SINGLE LOGISTIC NETWORK OF ALL STAKEHOLDERS

LOGISTICSLOGISTICS

CAPITAL BECOMES MORE IMPORTANT THAN STEELCAPITAL BECOMES MORE IMPORTANT THAN STEELCAPITAL BECOMES MORE IMPORTANT THAN STEELCAPITAL BECOMES MORE IMPORTANT THAN STEEL

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ACTUAL VALUE CHAINACTUAL VALUE CHAIN

GET-THE-PRODUCT-OUT ORIENTEDGET-THE-PRODUCT-OUT ORIENTEDONE WAY BUSINESS DEVELOPMENT ONE WAY BUSINESS DEVELOPMENT

MISSING OPPORTUNITIES OF MISSING OPPORTUNITIES OF RESOURCES SHARING RESOURCES SHARING

UNUSED SYNERGY POTENTIALS UNUSED SYNERGY POTENTIALS MISSING BUSINESS OPPORTUNITIES MISSING BUSINESS OPPORTUNITIES

IN SEARCH OF A NEW GLOBAL STEEL + METALS DISTRIBUTION IN SEARCH OF A NEW GLOBAL STEEL + METALS DISTRIBUTION PARADIGMA, INNOVATIVE DISTRIBUTORS ARE DEVELOPPING PARADIGMA, INNOVATIVE DISTRIBUTORS ARE DEVELOPPING ADVANCED VALUE NETWORKING BUSINESS MODELS AND WILL ADVANCED VALUE NETWORKING BUSINESS MODELS AND WILL CLEARLY CHALLENGE REGIONAL HEROESCLEARLY CHALLENGE REGIONAL HEROES

FINALLY AN OUTLOOK . . . .FINALLY AN OUTLOOK . . . .FINALLY AN OUTLOOK . . . .FINALLY AN OUTLOOK . . . .

OPTIMISE CUSTOMER PROCESSESOPTIMISE CUSTOMER PROCESSESPRESENCE IN ALL WORLD MARKETS TOPRESENCE IN ALL WORLD MARKETS TOSUPPORT THE WORLD FACTORY ANDSUPPORT THE WORLD FACTORY ANDDELOCALISING INDUSTRIESDELOCALISING INDUSTRIES

FUTURE VALUE NETWORKINGFUTURE VALUE NETWORKING

MARKET AND SEGMENT BASEDMARKET AND SEGMENT BASEDVALUE NETWORK ORIENTATIONVALUE NETWORK ORIENTATION

CAPITALISING ON LINKING ALL RELATED CAPITALISING ON LINKING ALL RELATED VALUE CHAINS OF CUSTOMERS, VALUE CHAINS OF CUSTOMERS, DISTRIBUTORS, PROCESSORS AND DISTRIBUTORS, PROCESSORS AND PRODUCERS FOR EFFICIENT LOGISTICSPRODUCERS FOR EFFICIENT LOGISTICS

OPTIMISE CUSTOMER PROCESSESPRESENCE IN ALL WORLD MARKETS TOSUPPORT THE WORLD FACTORY ANDDELOCALISING INDUSTRIES

OPTIMISE CUSTOMER PROCESSESPRESENCE IN ALL WORLD MARKETS TOSUPPORT THE WORLD FACTORY ANDDELOCALISING INDUSTRIES

. . . . NEW CHALLENGES EVEN FOR OLD HEROES. . . . NEW CHALLENGES EVEN FOR OLD HEROES. . . . NEW CHALLENGES EVEN FOR OLD HEROES. . . . NEW CHALLENGES EVEN FOR OLD HEROES

Metal One promises tobecome the customer'smost capable partner

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TO OPTIMISE CUSTOMER PROCESSES -TO OPTIMISE CUSTOMER PROCESSES -TO OPTIMISE CUSTOMER PROCESSES -TO OPTIMISE CUSTOMER PROCESSES -

WORLD-WIDE CUSTOMER BASEWORLD-WIDE CUSTOMER BASE

VALUE

VALUE

UNIQUESERVICE

PROPOSAL

UNIQUESERVICE

PROPOSAL

SUPPLY CHAIN MGT TECHNICAL SUPPORT

FINANCING & IT NETWORK

SUPPLY CHAIN MGT TECHNICAL SUPPORT

FINANCING & IT NETWORK

LOGISTICS - FREIGHTINGSTOCKING - PROCESSING -

TRANSFORMATIONSOURCING - TRADING

LOGISTICS - FREIGHTINGSTOCKING - PROCESSING -

TRANSFORMATIONSOURCING - TRADING

COST SAVINGLEADS TO BETTER

PRODUCTIVITY

COST SAVINGLEADS TO BETTER

PRODUCTIVITYIMPROVE

MARKETING&SALESIMPROVE

MARKETING&SALESHIGH VALUE

ADDED PRODUCTSHIGH VALUE

ADDED PRODUCTSDEVELOP

NEW CUSTOMERBUSINESS MODELS

DEVELOPNEW CUSTOMER

BUSINESS MODELS

Metal One promises tobecome the customer'smost capable partner

A STRATEGIC OPTION!A STRATEGIC OPTION!A STRATEGIC OPTION!A STRATEGIC OPTION!

STEEL AND METALS INTERMEDIATING VALUE NETWORKSTEEL AND METALS INTERMEDIATING VALUE NETWORK

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