At a Glance
- The client faced challenges in untapped scrap sourcing potential, suboptimal use of alternative grades, perceived lack of local scrap availability, and non-strategic non-metallic sourcing practices.
- Key results of the project included a 0.8% reduction in scrap cost and 4.3% potential annual spend reduction locked into non-metallic agreements.
Key results
100% of spend reviewed, with 83% identified as impactable
4.3% annual spend reduction potential locked into contracts
15% increase in both vendor visitations and active scrap suppliers
Background
The steel manufacturing industry in Southeast Asia is growing steadily, with regional steel demand expected to increase by about 3.7% year-on-year in 2024, reaching approximately 76.5 million tons. This growth is driven by expanding construction, manufacturing, and infrastructure projects across the region, although it faces challenges such as global inflation, price volatility, and slowing demand from major markets like China . Thailand’s steel industry has an annual production capacity of around 10 million tons, and the broader Southeast Asian steel market is expected to grow steadily over the next decade, driven by infrastructure development and industrial expansion.
The client is Thailand’s leading steel manufacturing company. Headquartered in Bangkok, the client operates production plants in three locations. The client is a subsidiary of a major global steel producer. As part of their ongoing efforts to improve performance and profitability, the client recognised the potential for significant improvements within their procurement function.
Analysis
Recognising the need to enhance performance and profitability, the client initiated a Procurement Excellence initiative to focus on reducing input costs.
This project was launched to improve profitability by tackling procurement inefficiencies in two major spend categories: scrap and non-metallic materials.
Challenges included:
- Passive sourcing approaches, overly reliant on production-driven requests
- Untapped opportunities for cost-effective local scrap sourcing and alternative grades
- Lack of unified procurement processes across sites
- Decentralised, ad-hoc purchases without structured vendor negotiations
Initial analysis identified an opportunity to reduce scrap costs by up to 1% and non-metallic costs by up to 5%.
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 – President and CEO
Project Approach
Adhering to Renoir’s methodology for sustainable, implemented change, two Management Action Teams (MATs) were established. These teams were tasked with reviewing their current practices, defining and developing necessary changes, and overseeing their implementation. The MATs were chaired by the client’s VP Procurement and reported to a fortnightly Steering Committee. The teams received dedicated support from Renoir Consultants and client Taskforce, all working collaboratively towards the objective of lowering input costs.
Implementation
Scrap Procurement Initiatives:
- Expanded supplier base, focusing on smaller volume/lower cost suppliers
- Promoted increased usage of alternative-grade scrap
- Improved performance visibility for data-driven decision-making
- Established cross-functional collaboration forums
Non-Metallic Procurement Initiatives:
- Introduced strategic sourcing practices such as demand and market analysis
- Standardised specifications across different plants
- Negotiated long-term contracts and introduced the 80/20 vendor allocation rule
- Embedded structured review meetings to ensure accountability and performance tracking
Results
The project drove tangible improvements across procurement operations:
- Scrap sourcing became more diversified with a 15% increase in active suppliers and a stronger focus on cost-effective alternatives, contributing to a 0.8% cost reduction.
- Alternative grades usage increased by 19.1%, improving input cost competitiveness without compromising quality.
- In the non-metallic category, 100% of the spend was reviewed, identifying 83% as impactable. This led to strategic agreements covering 51% of that spend and locked in a 4.3% potential annual spend reduction.
- Organisationally, departments began working in closer alignment, transitioning from siloed to strategic procurement practices.
The Procurement Excellence initiative has since evolved into an ongoing internal program, yielding additional gains and fostering a culture of continuous improvement.
*To maintain strict confidentiality, customer-specific details have been consciously omitted.
Structured transformation and strategic sourcing can deliver real results.
