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					Driving cost efficiencies through next generation procurement programs 8th July 2009

PRESENTATION

PURPOSE
• Company Overview • Cards • Strategy • Implementation • Control

• Our card profile
• Card efficiency • Where are we today
2

THE FACTS
People Revenue Locations

>10,000 >$6 billion Over 200 locations in Australia, more than 10 offshore locations in Asia, USA, UK

ASX Ranking

~Top 60
Leading in all products Strong market presence: • Rail • Mining • Construction

Market Position

3

OneSteel is a uniquely integrated portfolio of complementary businesses, which leverages its value chain to make our customers more competitive and deliver reliable and sustainable returns to our shareholders. OneSteel capabilities include: • Manufacturing and value add steel products • Strong distribution network • Niche market positions • Recycling • Mining and external iron ore sales
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Procurement model
1. Organisation

4. Performance Management

3. Technology

2. Processes

Reference: “Procurement’s New Operating Model” by Patrick W Houston, Robert Hutchens, and Alan S. Pincus; Booz & Company Inc. 2008; 5

Procurement Transaction Strategy
Strategic Purchasing Management

e Procurement System and Group Contracts

Time and Attendance System

Strategic Supplier

Vendor Replenishment

User

Tactical Purchasing Management

Purchasing Card/American Express

Direct Tactical Purchase Service

Tactical Supplier

Maintenance Management System

On Site Managed Stocks (Central Store)

MRP

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Procurement Transaction Strategy
MRP Stock Item Vendor Replenishment

Need identified Travel and Entertainment American Express

Non Stock Item

Labour / Equipment Hire

Time and Attendance System

Under A$2,000

Purchasing Card

Others Purchase Order Over $2,000 eProcurement

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Card rules
• Purchases < $2,000 • Non-stock • Non-freight • Non-safety items

• Non-hazardous goods
• No personal items • No cash facility

• Documented policy

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Card implementation
• Senior executive support • Rollout plan • Business unit input • Communication – Business buy in

• Benefits
• Control • Card holder training • Process support

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Card control
• Accountabilities • Training

• Transparency
• Reporting • Fraud analysis

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Card control
• No training – no card

•Accountabilities
•Coding •Approval • Web based training • Purchasing rules • Card requirements • Spendvision

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Card control
• Transparency • Spendvision software

• Coding
• Approval • Receipts filed and audited • Reporting • Transactions by employee • Uncoded transactions • Un approved transactions • Weekend spend/Consultants/Business services • Reviewed by Commercial Managers
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Card control - Spendvision
• Electronic data uploaded each day, no paper statements are issued • Cardholders, using the Internet,

• Review & justify transactions on-line
• Allocate expenses to various usage categories • Record reason for expense • Approvers using the Internet • Review and approve ALL expenses on-line - without the need to wade through paper receipts

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Card fraud risks
• Medium risk / low value • Risk minimisation

• Clear accountabilities
• Increased transparency • Reporting • DTect • Internal audit

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Card profile
Cards Transac tions
50,000

Annual spend $000s
$11,000

•

Amex
– – – – Travel & entertainment Card usage points available to cardholder Coded & approved through Spendvision Transactions uploaded to JDE/SAP

Amex

670

Visa

580

75,000

$30,000

TOTAL

1,250

125,000

$41,000

•

Visa
– – – Non-stock items < $2,000 Coded & approved through Spendvision Transactions uploaded to JDE/SAP

Amex 670

236

Visa 580

Cardholders = 1014
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Spend by Division
Amex cards - $11.0m

Total spend - $41.0m
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

100% 80%

25 370

$0.5 $5.4

25 619 95

$1.0 $7.9 $6.0

60% 40% 20% 0%
CARDS $ SPEND

1.2 0.1 0.5 0.5 1.5

34 265

$1.4 $3.7

2.1
SPEND % by category

$26.1 535
Visa cards - $30.0m
100%

CARDS

$ SPEND
80%

25 249 61

$0.5 $2.5 $4.6

RSPD

Recyclers

SSD

GO/SSBS

60% 40% 20% 0%
CARDS $ SPEND

$22.4 270

0.5 0.6 0.7 0.1 0.2 0.3 0.4 0.7 1.0 1.1 1.3 1.8 2.1 2.3 3.0
SPEND % by category

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Actual Spend Data (FY07 data)
Current Policy
Transactions
Low Value T&E Total

ex SSG
Number
52,510 33,766 86,276

OST
Value Number Value

23,056,424 9,308,323 32,364,747

85,759

17,770,303

Low Value (ex SSG) Category
Utilities Services Safety Rates Contracts PO Pcard Total
Note: Some subjectiveness in the categorisation of this data

Number
456 6,113 269 26 24,776 87 20,783 52,510

Value
222,063 3,441,926 111,247 15,863 11,499,588 42,120 7,723,617 23,056,424
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Card efficiency

Purchase order based purchases
Establish need for goods or service Obtain price and quantity details Raise Purchase Order Approve Purchase Order Submit purchase order to supplier Receipt delivery of goods Receive invoice from supplier Accounts Payable to process for payment

PCard based purchases
Establish need for goods or service Obtain price And quantity details Receipt delivery of goods

Pay account

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Cost of transaction
Net operating cost:
• ERP processing
– Visa 75,000 = 3 X AP $150K

Additional Benefits:
• Category spend analysis • Transaction transparency
– Approval & coding – Exception reporting

•

Card processing
– Spendvision software ($55K) – 1.5 support person ($75K) ($130K)

• Low merchant fees for suppliers vs earlier payment • No vendor setup

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Where are we today
• One card • Travel & entertainment • PCard • PCard scaled back

• Non-repetitive purchases
• No upper limit • Not proactive support • More transparency of transaction desired

• Fear of over use

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Card success
• Simple concept • Management support • Implementation support • Ongoing support

• Formal training
• Policy compliance • Reporting • Control

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Card opportunities
• Less restrictions • Category exclusion • Enhanced data • Vendor Master coding

• Vendor conversion
• PO payment

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