Handling and transportation of raw-materials, additives and other

The combination consists of three contracts (outlined in Table 9). The first one includes the unloading, transportation and feeding of materials related to manufacturing of iron.

The unloading comprises of shifting raw-materials, such as pellet, limestone, coke and others from the arriving barges at the harbor. From there on, the materials in question are transported to the feeders or to raw-material site directly or through intermediate

storage. The unloading of barges also includes other related work, for example post-unload cleaning. Additionally, the sold materials to external customers from the iron production require occasional work assignments, such as transportation related to ship-ping. The contract is hour-based and it consists of three positions. However, the invoic-ing is conducted by machinery and the work assignments require certain machines. The main utilized machinery concerns multiple large wheel loaders and several different earthmovers from two different size classes. The current contract period has been valid for two years starting from April 2013. Although, the contract included an option of one year, which was confirmed recently. As a result, the current agreement period is valid until April 2016.

The second service concerns the activities performed in the iron production area. The contract is separated to five work assignments; material screening and feeding to blast furnaces, screening of limestone and feeding to lime burning kilns, screening and feed-ing of coke to conveyor, handlfeed-ing and feedfeed-ing of raw-material in briquettfeed-ing plant and screening and warehousing of pellet material. Some of these are further divided into sub-positions. The majority of the handled materials are briquettes, pellets or steel scum. However, numerous other materials, such as lime and coke are screened and fed in the service. All of the screening is invoiced by tons according to the contract. The grounds of payment are the weigh-ins conducted with different conveyor system scales.

The machinery utilized in this contract are large-sized wheel loaders and medium-sized earth movers. Furthermore, the first three positions include multiple separate screening stations. The ongoing contract period is six years, starting from the beginning of 2012, lasting to the end of 2017.

The third contract consists of transportation, screening and chipping of additives and other process recycling material. The service activities are performed in various differ-ent locations, including blast furnace, lime burning kilns, steel plant and coke plant.

Work assignments are divided according to location and most of them concerns trans-porting, chipping, cleaning or dismantling related activities. The revenue logic is vary-ing. In the transporting assignments the supplier is paid by moved tons whereas in other activities invoicing is conducted by the times the assignment in question is performed.

In the contract, a specific fixed pricing is determined for all positions. The machinery exploited in the contract is quite extensive and diverse. Wheel loaders, earth movers, special machines such as pressure tank vehicles and excavators are used depending on the nature of the activity. In addition, some positions require telescopic handlers or screening stations. At present, the agreement period is approximately half way through, starting from the end of 2012. Hence, the contract is valid until 2017 November.

All of the mentioned service contracts utilize somewhat similar machinery resources.

The first two contracts exploit alike large-sized wheel loaders in all of the work assign-ments. Additionally, medium-sized earth movers are used in all positions in the second service and in some positions in the first service. As said, the third service includes a

broader machinery list, however, earth movers and wheel loaders of different sizes are utilized in multiple positions, including activities for example in coke plant, steel plant and blast furnaces. Furthermore, screening plant is part of the equipment on all three services. In terms of operative supervision resources, contracts have a fair amount of similarities also. The first two services have identical supervisors in all work assign-ments. The same personnel are monitoring the activities in some positions in third con-tract, mainly in the blast furnace area. Moreover, there are only few supervisors in the third contract that aren’t connected to the first two services, who are responsible for the positions at steel plant, coke plant and some other locations. As can be seen, for the most part, the first two services utilize similar resources while the third has a broader and more specific machinery and supervisor requirements.

A number of possible advantages in merging the mentioned services can be found. First off, currently the services are provided by two different contractors. The other one is supplying the unloading and the handling of recycling material contracts and the other one has the secondly mentioned screening and feeding service in iron production. In fact, all of the three services might be contracted with three different suppliers in the next agreement period. In other words, the synergies of machinery resource usage or supplier’s personnel are presently unfeasible. Of course, the supplier having two of the contracts might benefit from that now but this might not be the case in the future. If all three services would be provided by same contractor, the flexibility of the services would increase. Currently, in the second contract the supplier seems to have incomplete utilization rates with some of the machines. For example in this case, the machines could be utilized in the other services. Additionally, the operative monitoring conducted by the buying company would be more fluent since the supervision would be more cen-tralized. Hence, the supervision of the suppliers work and the handling of deviations and other service related work could become more effective and explicit.

Other appearing benefits are the decrease in the amount of interfaces, the work load of procurement and the convenience of main supervision. An example of a challenging interface between the first two contracts is related to material flow. Currently the other supplier transports steel scum to intermediate storage, from where the other contractor shifts it to further handling. Since the services aren’t optimized according to company process, the steel scum freezes especially in winter time before it is picked up for screening. The screening is tremendously challenging if such cool down occurs. In fact, the screening might be totally unfeasible if the scum is in storage for too long. To em-phasize, such merging of services would simplify the situation. Additionally, the con-tracts require work from the procurement and especially the service purchaser. In the case of merging, the future tendering and administrative work would be lesser. Addi-tionally, the first two services are handled by the same main supervisor, which could be in the future centralized and dealt together. The third service could also be in hands of

the same quality manager, which is now responsible for the other two. Major benefits could also be achieved due to greater volume, which could decrease the unit prices.

At the same time, attaching the services has some possible threats. Regarding the first contract, operations related to the barges carrying raw-materials have currently some uncertain features. The usage of the barges is somewhat doubtful at the moment, which affects the total volume of material. It is considered as a threat that the continuation of barge shipping would not take place and that would have an influence on the unit prices of the contract wholeness. Also, the screening stations on the second contract are cur-rently owned by the supplier, which is considered as a significant investment. Coupled with other required investments, the wholeness would demand for remarkable investing from the supplier. Although this is not necessarily a downside, some considered that it might hamper the competitive situation in the future. By the same token, some argued that the supplier might gain an excessively great position and that the costs might hence be increased and quality might be reduced. The competition might also suffer since the extra work appearing in middle ground wouldn’t be possible to tender out with different contractors.

The contract including handling of recycling material requires experience and has been provided by the same contractor for a long time. As a result, some of the work assign-ments demand a tremendous amount of learning from the possible new contractor. Ad-ditionally, the positions in question are somewhat different than others and the supplier selected would have to have wide-ranging knowhow and equipment. The machinery required for these activities is fairly differing when compared to the ones in the first two contracts. Also, activities in the third contract have been performed by multiple contrac-tors in the past and the present situation already has faced some merging of assign-ments. In fact, this has caused difficulties regarding tendering. In the last competitive bidding, only some qualified quotations appeared, since others probably found the con-tract requirements overly demanding and risky. Again, the received proposals weren’t complete and the supplier selection was not plain and simple. Hence, connecting this already wide-ranging resources requiring contract with the others might hamper the competitive situation furthermore. Some also highlighted the dependence on the select-ed supplier. In case of contractor’s financial difficulties or other challenges such as bankruptcy has a direct influence to the buying company’s processes. Therefore, the supplier offering the services to all of the activities needs to be selected carefully. All of the mentioned opportunities and challenges are described in Table 9.

Table 9: Resulted opportunities and challenges from the interviews of the merging of the services in iron production

6.2.2 Transportation and handling of semi-products and