Implementation of SAP EWMautomated Warehouse Management Systemat the material and equipment warehouses

of Vyksa Steel Works, AO OMK

Vadim NazarovHead of Procurement Directorate Department of АО OMK

OMK Today

§ Largest Russian manufacturer of steel products for top energy, transport, and industrial companies

§ Integrated supplier of products for gas and oil production and transportation

§ Produces pipes, railway wheels, profile rolled steel, pipeline fittings and valves, automotive springs

Nizhny Novgorod Oblast

Republic of Tatarstan

Republic of Bashkortostan Perm KraiChelyabinsk

Oblast

OMK INCLUDES FIVE LARGE ENTERPRISES IN METALLURGICAL INDUSTRY

UNITED METALLURGICAL COMPANY (AO OMK)

OMK CustomersTOP RUSSIAN AND FOREIGN COMPANIES – MAIN CONSUMERS OF OMK PRODUCTS

Highlights

§ OMK is one of Russia's largest pipe manufacturers: 16% of the Russian market, including 22% of the large diameter pipe market

§ OMK is Europe's largest of large diameter pipes, the only Russian supplier of pipes for the Nord Stream project

§ OMK is a leading manufacturer of all-rolled railway wheels in Russia

§ OMK supplies products to more than 30 countries

§ OMK Group employs more than 23,000 people

Highlights

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57%*Railway wheels

56%*Automotivesprings

1st place2nd place

16%*

23%*Pipe casings

Pipe productsin general

3rd place

* Market share in Russia14%*

Large diameter pipes

22%*

12%*

13%*

12%*

9%*

Pipeline fittings

Shaped tubes

Pipeline valves

Oil and gas pipes

Waterand gas pipes

Site of Warehouse Automation

§ Largest manufacturer of welded steel pipes and railway wheels in Russia

§ The company employs more than 12,000 employees

VYKSA STEEL WORKS

1757

YEAR OF FOUNDATION

2 million tons

ANNUAL PRODUCTION CAPACITY OF LARGE DIAMETER PIPES

860 thousand pieces

MAXIMUM PRODUCTION CAPACITY OF RAILWAY WHEELS

Organizational Scope of the Project

§ № 279 - Metalware and auxiliary materials warehouse

§ № 286 - Spare parts and equipment warehouse

2 automated central material and equipment warehouses

Quantification of the project

11,160 m²TOTALWAREHOUSE AREA

100,000+ITEMS IN THE MASTER REFERENCED DATA BOOK

100+MATERIALGROUPS

10+OUTDOOR SITESFOR LARGE EQUIPMENT

Central material and equipment warehouses receive inventoryand equipment from vendors, conduct quality control, anddistribute materials for shop warehouses. They also handlereturns.

Prerequisite of automation Material and Equipment Warehouses

§ Necessity of reliable data on physical inventory and movements of goods in the warehouseas well as on the stay duration of goods in the warehouse in real time

§ Transparency and flexibility of inventory control and warehouse cargo handling

§ Increase speed and accuracy of operations

§ Reduce errors when placing and matching orders

§ Efficient use of warehouse space and effective organization of the goods placement system

§ Versatility and adaptability of warehouse employees. Now we can quickly replace and relocate our warehouse employees depending on the tasks and during peak loads

§ Minimization of inventory time. Data on discrepancies are entered into the system automatically during the inventory in real time

§ Reduced time spent by vehicles in shipping and delivery warehouses

Automation Goals and WMS System Requirements

§ All warehouse operations displayed in real time

§ Increased speed and accuracy of order processing

§ Increased efficiency of warehouse space utilization and optimization of placement strategies and warehouse

topology

§ Reduced inventory time and transfer of the inventory results into accounting systems

§ Optimization of warehouse business processes and improvement of warehouse processing service level

§ Reduced human factor in the operational management of warehouse operations

§ Increased transparency and personalization of all warehouse operations

§ Reduced time spent by vehicles in shipping and delivery warehouses

§ Ensuring further scalability of the system

Automation of warehouse processes

Optimization of labor costs

Improved manageability and quality of warehouse

planningReal time stock

management

Choice of Solution and Contractor

§ A proven solution. SAP is the world leader in enterprise applications

§ Large partner network and availability of a wide range of specialists

§ Lowest cost of ownership - seamless integration with other SAP applications and maximum use of standard configuration when scaling

§ Open source code - flexible and fast implementation and development

§ Constant expansion of functionality and release of new versions

§ SAP is an international developer with its own data center in Russia; and SAP is constantly expanding its capacity

§ Russian-speaking 24/7 support with prompt response to any customer request

§ Value of partner projects - high quality projects and great business performance

WHY THIS SOLUTION WHY THIS CONTRACTOR

§ 25 years of experience and impeccable reputation in the market of logistics and IT consulting

§ Highly professional team

§ Proven by numerous recommendations experience in the design of warehouse processes, topology design and automation of warehouse processes based on SAP EWM

§ Extensive experience with material and equipment warehouses,including automation of warehouse processes based on SAP EWM

§ Deep knowledge of operational logistics and physical warehousing and manufacturing business processes

§ Extensive experience in project implementation in manufacturing companies

§ Successful complex implementation of integration projects

§ Warranty and software maintenance to solve the Customer’s issues,24/7 support

Implemented SAP EWM FunctionsINCOMING

GOODS FLOWINTRA-WAREHOUSE

PROCESSESOUTGOING

GOODS FLOW§ Acceptance§ Labelling§ Placing products in the warehouse§ Product quality control§ Returning of displacements

§ Storage by different groups of goods§ Intra-warehouse product movements§ Packaging§ Rejection§ Wave picking, planning waves§ Viewing the goods value when inventory auditing§ Personnel planning for supply volumes

§ Reservation§ Order picking§ Acquisition and shipment of M&E from a warehouse§ Products shipment§ Package planning§ Preparation of supporting documentation

END-TO-END PROCESSES

§ Task and asset managements§ Warehouse operation monitoring (operational control over operations execution)

§ Cross-docking and transit

IT Equipment

§ Integration of SAP EWM warehouse management system with ITequipment:- Data collection terminals for warm and cold warehouses(frost-resistant)

- Mobile and stationary label printers with consumables

§ Equipping warehouses with up-to-date Wi-Fi infrastructure

§ Wi-Fi setup and integration into a common corporate WAN

§ Support of on-line PDT operation via corporate Wi-Fi network

Project Stages and DeadlinesFeb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Stage 1. Preparation

Development of Technical specifications

Project review

Tendering: selection of WMS system and contractor

IT Project organization

Stage 2. Implementation

Project solution development

Setup and functional testing

Purchase of IT equipment (PDTs, Wi-Fi access points, label printers)

Functional and integration testing

User training

Preparation for pilot operation

Stage 3. Pilot operation

Start of pilot operation. Initial on-site support

Transfer to commercial operation

2018 2019

Results of SAP EWM ImplementationIncoming goods flow

ü Reliable reportingü Reduced labor costs during placement and minimization of administrative resources for managing warehouse staff,

reduction in staff numbersü Minimization of shortages, cross-picking, surplusesü Faster acceptance and placement of M&E in storageü Efficient placement of goods and use of warehouse space

BENEFITS

BEFORE AFTER

Ø Data in the accounting system and the actual data havesignificant differences

Ø No transparent report on the current inventory balances in allwarehouses in real time

Ø Placement accounting in MS ExcelØ The choice of location depends on accountable personØ No data on personal performance of employeesØ No dimensions and weights

ü Data on acceptance and actual balances available in real timeü Warehouse workers performing their tasks are managed through

SAP EWMü Assets are divided by zones and types of tasksü We can prioritize warehouse tasks and control their executionü Monitoring of open warehouse tasksü Statistics on warehouse operations with assetsü Accounting in several units at the same timeü Maintaining dimensions and weights allows us to recognize cell

capacity and load on racks

Results of SAP EWM ImplementationIntra-warehouse processes

ü Transparent movement operationsü Saving time when locating products for shippingü Significant reduction of time and labor costs for inventoryü Warehouse staff shift planning for planned volumes of work in the warehouseü Reducing the percentage of errors in picking and shipment of goods (accurate operations)ü Reduced stock for production needsü We are able to use TOPO and form optimal minimum required stock of M&E for production needs

BENEFITS

BEFORE AFTER

Ø The warehouse is divided into several sections with an accountable person responsible only for their site

Ø Accountable persons can choose the storing or movement of production on the assigned site in a warehouse

Ø No history or statistics on warehouse operations on internal movements within the warehouse or site

Ø Long and time-consuming inventoryØ M&E storage locations are recorded in Excel. Each accountable

person has their own file with their own way of storing information on M&E location

ü SAP EWM stores the exact location and history of product movement

ü An internal product movement order is created, managed, and controlled in SAP EWM

ü All data of the move initiator is capturedü SAP EWM generates statistics of warehouse operations of product

movementü Optimization of storage in cells, saving storage bins, flexibility and

speed in processing of goods using alternative UOM, calculation of volumes to optimize the creation of warehouse orders

ü Multiple choice of inventory methods without warehouse downtime

Results of SAP EWM ImplementationOutgoing goods flow

ü Transparent traceability of all control points allows us to analyze speed of loading in warehouses and unloading in production shopsü Significant reduction of loading time and vehicle downtimeü Reduced labor costs during picking and minimization of administrative resources for managing warehouse staff,

reduction in staff numbers

BEFORE AFTER

Ø Additional run period and extra time for loading due to non-optimal placement of M&E in the warehouse

Ø Risk of cross-picking due to human errorØ Shipment gate is controlled manually based on the actual

location of M&E in the warehouseØ Vehicle is forced to stand idle while determining the storage

location of the M&E and (re)assignment of the gateØ Time gap between the actual completion of loading and

entering data on the completion in the ERP

ü Optimal gate is detected by the current location of the required batches of products and total run period of equipment

ü Task assignment to the assets is managed in EWM

ü Pre-packaged M&E by orderü Automated search of M&E (sets) in the warehouse

according to the specified criteria

ü SAP EWM generates statistics of warehouse shipment operations

ü Upon completion of loading the data is transferred from SAP EWM to SAP ERP

BENEFITS

Benefits of SAP EWM Implementation

§ Warehouse productivity increased by more than 20%

§ Reduction of labor costs by 15%

§ Reduction of errors while order picking by 70%

§ Reducing the amount of surpluses and shortages by 50%

§ 30% faster annual inventory

§ 50% reduction in deferred inventory§ 50% reduction of production downtime due to untimely or incorrect provision of M&E

ACTUAL BENEFITS AFTER 3 MONTHS

What’s NextFURTHER DISTRIBUTION OF THE SOLUTION AND APPROACH TO DISTRIBUTION

A single solution based on SAP EWM for managing supply warehouses of AO VSW and other OMK Group companies

More efficient and transparent business processes Management decision supportReduced logistics costs Continuous development potential and

investment protection

1 SAP EWM's it architecture, functionality, and performance enable us to scale our solution in a single installation

We have built a core platform for further distribution of SAP EWM

2

Simple integration with new objects in the CIS structure and model settings and development transfer3

Implementation of new extensions and add-ons adjusted for new warehouses and their processes

4

5

Adaptation of the configuration to the special aspects of operation in a particular warehouse

Maximum use of typical business processes and standard system configuration

Thank You!Vadim Nazarov

Head of Procurement Directorate Department of АО OMK+7 915 283 41 85vnazarov@omk.ru