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SAP-Based Solution for Planning ofthe End-to-End Production andSupply Chain of a Mining andMetallurgical Holding

Contents1. METINVEST Group2. Supply planning powered by SAP3. Planning mechanisms provided by SAP: limitations and courseof development4. End-to-end "coal-coke-cast iron" planning model powered bySAP5. Course of development for the Company's integratedplanning system2

METINVEST Group, a vertically integrated group of steel and mining companiesPRODUCTION ASSETS OFMETINVESTMININGMETALLURGYUkrainian assets of Metinvest (below)Global assets of Metinvest (above)AzovstalSevGOKEMZUkrainian assetsIlyich Iron and Steel Works ofMariupolDKHZCGOKKRDUFerriera Valsider (Italy)InGOKZaporozhstalZKHZHTZUGOKMetinvest Trametal (Italy)Spartan (United Kingdom)Promet Steel (Bulgaria)United Coat (USA)SALESSERVICELOGISTICSCOKING COALIRON ORE CONCENTRATEmilliontonsmilliontonsCAST IRONSTEELmilliontonsmilliontonsLegendAssetsJoint VenturesIndependent EnterprisesLogistic routesSEMI-FINISHED PRODUCTSmilliontonsFLAT PRODUCTSmilliontonsLONG PRODUCTSPIPESmilliontonsthousandtons* These data refer to 2016.3

Operational Planning Business Model at METINVESTIncominginformationSales forecastSTRATEGICPLANNINGSALESContracted volumesLong-termPlanning (LTP)LOGISTICSPlanningresultsStrategic Goalsand ObjectivesOrders from thedistribution networkManagementCompanyLogistic costsSales & OperationsPlanning (S&OP)LogisticlimitationsSales planShort-term OperationalPlanning (OFP)MaterialsBUDGETINGPROCUREMENTOperational plan:Transportation planProcurement planProduction planCommercialpriorities andlimitationsPRODUCTIONCalendaring (MS)EnterprisesAvailable worktimefund of the primaryequipmentSpecifications andtechnological flowchartsProductionversionsProcessesprovided by SAPDirections forfurther development4

Architecture of the Solution for Implementing Planning Processes in SAPSAP MDGSAP APO/DPMaterialsForecasted sales for product groupsPrice forecast based on the terms ofsaleSAP ERPSpecifications andtechnological flow chartsSAP BWSales planProduction planTransportation planSAP APO/SNPDemand for primary rawmaterialsWorkplacesSupply chain planningSAP ERPMaterialsPlanned Order FormSchedule of repairsForecasted commoditypricesSAP APO/DPPlanned ordersLogistic componentPurchase requestsLogistic limitationsQuoting table5

Supply Chain Planning Model at МETINVESTScope of thesupply chain planning model atMETINVEST: 12 manufacturing enterprises 700 locations of demand 3,000 transportation relationsFragment of the logistical model of the intragroupcooperation at METINVESTStructure of the supply chainplanning model at METINVEST: Logistic model Production planning modelsFragment of the logistic model of commodity delivery frommetallurgical enterprises to the locations of demand6

Logistic model in SAP APO SNPSuppliers of rawmaterialsProduction enterprisesMining andProcessingSSCLogistic model:Graph vertices: Metallurgicalcoalwaste metallimestonebentonitemiscellaneousLocations ofdemandTransferstationsGraph edges: Coke andChemicalsGraph vertexlocations of demandsuppliersload transfer onsGraph edgeSAP APO SNP7

Production planning models powered by SAP ERPThe capacity of the production vertices on the graph is determined by production planning modelspigsinterProduction model:RawmaterialsSemifinishedproductsProductionof cast ironsinterMasterPlanlimewaste metal FerriticProductionof steelcastirontransfer barProductionof cast barssteeltransferbartransfer barpigFlat productsstripProduction of railbracesrailsbracesCutting ofwire rodbarswire rodgradeworkplaces production machinesmaster data specifications technological flow charts production versionsrawmaterialsSinter workshopBlast-furnace workshopAM No. 1DP No. 1rawmaterialsOxygen-converter workshopKK No. 1AM No. 3Stan 550MNLZ No. 2DP 5KK No. 3AM No. 4EMZMasterPlanbarsgradewire rodstripStan 150gradeUPRSStan 390SemifinishedproductsgradePOSpigRawmaterialsStan 360MNLZ No. 1KK No. 2DP 3AM No. 2Rolling workshop of EMZsteelMaterials Master Record manufacturedproductsrawmaterialsSquare transfer baroSinterproductioncokecastironoiron oreConcentratepelletslimesinterosintering oreRolling workshopsrailsbracesgradeMF EMZSAP ERP8

Implementation of SOP on the Basis of SAPPlanningof productionEvolution of the SOP projectLogistics cost planningPlanning andoptimization of utilizationof capacities ofmetallurgical complexesSales forecastingPlanningof logistic flowsof commodity outputPlanning andoptimizationof logistic flowsof commodity outputPlanning andoptimization of GOKcapacity utilizationPlanning and optimizationof requirements forprimary raw materials andmaterialsPlanningof supply chainat METINVEST:Planning and optimizationof logistic flows of primaryraw materials and materialsPlanning andoptimization ofutilization of capacitiesof KHPPlanning and optimizationof requirements of KHP forMETINVEST in relation tocoal raw materials9

Planning Mechanisms in SAP APO SNPProduction planningmechanism in SAP SNPDetermination (selection) of the most expedient(optimal) version of the manufacturer from themany versions loaded into the systemApplicability–concentrating and burningcapacities of GOKs–steelmaking capacities ofmetallurgical enterprises–rolling capacities of metallurgicalenterprises–coke and chemical plants–agglomeration and blast-furnaceprocessing at metallurgicalenterprises ?10

User LimitationsSAP MDGSAP APO/SNPMaterialsPre-configured logistics modelpowered by SAPSAP ERPPlanned ordersPurchase requestsSAP ERPSAP BWSpecifications andtechnological flow chartsUser LimitationsSales planWorkplacesProduction planMaterialsTransportation planSchedule of repairsSAP APO/DPForecasted commoditypricesSAP APO/DPLogistic componentForecasted sales forproduct groupsLogistic limitationsPrice forecast based on theterms of saleDemand for primary rawmaterials11

Architecture of the Solution for the End-to-End Planning of the "CoalCoke-Cast Iron" Technological ChainThe end-to-end planning model consists of three modules:KHLCoalconcentrateMix materialproductionRawmaterialsgascoal mineSemi-finishedproductsMasterPlanProductionof cokeGrosscokeCoke sortingBlastfurnaceCokeCoke nut Coke fineCoke gasModel of interrelations between qualitative indicatorsQualitativeindicators ofmix material /cokeDCiron ity of DPsintering eSinterAgglomeration and blastfurnace processingcokeLiquid cast ironproductionLiquidcast ironCast iron pouringPig ironLiquid castiron(processed)Master Plan12

Results of Testing the Prototype of the Solution for the End-to-End Planning ofthe "Coal-Coke-Cast Iron" Technological ChainResults of testingSolution scope 4 coke and chemical plants 3 metallurgical enterprises 60 suppliers of coal and cokeCost of coal mix material 0.2%Specific coke consumption–2.6%Production volume of cast iron 1.5%KHP No. 1Structure of the economic effect, MetallurgicalComplex No. 1KHP No. 2Suppliers ofcoal and coalconcentrateKHP No. 3MetallurgicalComplex No. 2KHP No. 4MetallurgicalComplex No. 3Coke suppliers(third party)CokeconsumptionCoal mixmaterialProductionvolume of castironEconomiceffect

Computational performanceInterrelations modelSAP APO SNPDirectcalculationprocessrestrictions(27,882 x 80,507)variablesCalculations 72 hoursTwo-stage calculation processBasic SOP solutionIntegrated Solution(without the Interrelationsmodel)(Database Interrelations model)SAP APO SNPKeyparametersSLIDE 12PermissibletolerancesData uploading – 1.5 minutesCalculations – 15 secondsModel loading 15 minutesCalculation 2 hours14

Directions for the Further Development of the Integrated Supply Chain PlanningSystem at METINVESTSales forecastSAP IBPSALESContracted volumesPlanning resultsOrders from thedistribution networkLOGISTICSLong-term Planning(LTP)ManagementCompanyLogistic costsLogistic limitationsSales & Operations Planning(S&OP)Sales planShort-term Operational Planning (OFP)PROCUREMENTBUDGETINGOperational plan:Transportation planMaterialsProcurement planProduction planCommercialpriorities andlimitationsPRODUCTIONCalendaring (MS)Availableworktime fund ofthe primaryequipmentSpecifications andtechnological flowchartsProductionversionsEnterprisesAPO PP/DS & APS15

Thank you.16

technological flow charts Production versions G STRATEGIC PLANNING Long-term Planning (LTP) Sales & Operations Planning (S&OP) Short-term Operational Planning (OFP) Calendaring (MS) Management Company Enterprises Strategic Goals and Objectives Processes provided by SAP Directions for further development Planning results Operational plan: Sales plan 4