25 October ‘17

MMK recognised for procurement efficiency in prestigious national award

Winning the award for “Economic Efficiency in Procurement Operations” is further confirmation of the openness and accessibility of the competitive procedures that PJSC MMK offers suppliers, and recognises the quality of the technology and regulations governing procurement in place at MMK.

In total, 127 of Russia’s largest companies competed for the chance to win in 6 nominations. PJSC Magnitogorsk Iron and Steel Works shared first place in the nomination for “Economic Efficiency in Procurement Operations” with NLMK Group. The winners were sel ected by the competition’s Public Council, which this year comprised 54 independent experts including: representatives of professional associations, leaders of procurement departments at major Russian companies, and recognised specialists in the field.

MMK entered their project “Comprehensive approach to supplier selection. Consignment warehousing as a way to increase working capital efficiency” into the contest. In order to increase supply system efficiency and develop a unique approach to selecting suppliers tailored to different procurement categories, PJSC MMK introduced cross-functional groups (CFG). During the first phase, they focused on annually purchased products approved in accordance with state standards: lighting equipment, stop valves (Ø ≤ 250 mm), spare parts for vehicle and tractor equipment, cable and computing equipment. The most efficient strategy for choosing a supplier was defined for every group, allowing for an increase in the accuracy of deliveries, minimising inventory stock, reducing labour costs for the supply process and the procurement cost. Creating a unified list of items fr om the Cost Estimation Standards Inventory (stock items from the directory of products purchased) made it possible to establish a competitive supplier selection process involving major manufacturing plants, with the goal being to establish long-term and mutually beneficial partnership and to sign a long-term framework agreement with the sel ected winner.

Work is now underway to incorporate stock items produced by those manufacturers identified during the competitive process to be incorporated into design solutions applied during the implementation of major investment projects.This will not only significantly reduce costs, since the supplier is chosen on a competitive basis, but will also reduce the time spent agreeing the numerous equivalents received during tenders fr om potential suppliers trying to select something “more or less similar to those specified in the design documentation”. Finally, and most importantly, it removes the need to amend design documentation wh ere equivalents have been agreed by the design organisation after the design documentation has been released.

“The main trend we have seen this year is that procurement activity in Russia is becoming increasingly high-tech, which can only be a positive. Most projects focus on introducing new technologies and solutions, automating supplier management and other related processes. To become a procurement success today you need to have an understanding not only of supply and logistics, but also of information technologies. Fr om my point of view, the main achievement our award represents is that, for the sixth year in a row, we have selected the best projects and brought them to the broader market, thus setting the bar for other companies,” said Alexander Boyko, chairman of the Public Council for the awards, and chairman of the Board of Directors of the company B2B-Center.

The “Leader in Competitive Procurement” award was established in 2012, with the key goal of drawing attention to the most significant projects in the field of procurement, which raise companies’ efficiency and deliver a substantial contribution to the further development of the entire market. Magnitogorsk Iron and Steel Works has won this award several times.

Information and Public Relations department, PJSC MMK.

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