group project supply chain system the case study of hoa phat steel

Hoa Phat Group operates in 5 main fields: Iron and steel including construction steel, hot rolled steel; Steel products including steel pipes, galvanized steel sheets, wire drawing steel

INTERNATIONAL UNIVERSITY - HOCHIMINH CITY NATIONAL UNIVERSITY BUSINESS ADMINISTRATION DEPARTMENT

GROUP PROJECT

SUPPLY CHAIN SYSTEM: THE CASE STUDY OF HOA PHAT STEEL Course: Logistics and Supply Chain Management (BAO22IU)

Lecturer: Dr Nguyen Hang Giang Anh

Ho Chỉ Minh City, Vietnam January 2024

VY ¡co 1 — 5

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| INTRODUCTION 1 Hoa Phat Group

In 2007, Hoa Phat restructured according to the Group model, in which Hoa Phat Group Joint Stock Company acted as the Parent Company In November of the same year, Hoa Phat officially listed shares on the Vietnam stock market with the stock code HPG Currently, Hoa Phat Group has 11 member companies with 25,424 employees, operating nationwide and 1 office in Singapore

Hoa Phat Group operates in 5 main fields: Iron and steel (including construction steel, hot rolled steel); Steel products (including steel pipes, galvanized steel sheets, wire drawing steel, prestressed steel); Agriculture; Real estate; Household appliances

For many consecutive years, Hoa Phat has been recognized in the Top of the largest and most effective enterprises in Vietnam In 2015, Hoa Phat was in the Top 5 largest private companies in Vietnam, Top 50 best listed companies of Forbes, Top 50 most effective companies in Vietnam, Top 40 largest enterprises in Vietnam,

2 Hoa Phat’s Steel

Up to now, steel production is a core area accounting for over 80% of the Group's revenue and profit The main products in Hoa Phat's steel production chain include construction steel, hot

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rolled coil steel (HRC), prestressed steel, wire drawing steel, steel pipes and color-coated steel

sheets of all kinds

With a capacity of over 8 million tons of steel of all kinds, Hoa Phat Group is the largest construction steel and steel pipe manufacturing enterprise in Vietnam with market shares of 32.5% and 31.7%, respectively.This also This also makes Hoa Phat the leader in Southeast Asia in the steel production industry

fron and Steel

® Construction steel: With the modern steel refining technologies from iron ore, Hoa Phat Steel meets all the most stringent standards both of Vietnam and the world with high and stable quality, diversified types, and grades of steel, becoming the largest steel producer and has held the leading market share for years

Hot rolled coil tiHRC): With a designed capacity of about 3 million tons per year, the hot

rolled coils (HRC) product will contribute to the domestic mechanical engineering industry to have self-control in raw materials, reducing dependence on imported goods Equipments of the HRC factory, which are all designed, supplied, and installed by Danieli Group of Italy, is the most advanced technology line in the world, including multiple equipment assemblies from refining, casting flat to rolling steel flat products

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Steel Products

¢ Steel pipe: With a capacity of 1 million tons per year, Hoa Phat Steel Pipe holds the No.1 market share in Vietnam with a system of factories and distributors nationwide, being always rated as the highest quality in Vietnam, especially hot-dip galvanized steel pipe

© Galvanized steel sheet: With a capacity of 400,000 tons per year, this is the most modern

and synchronous factory in Vietnam so far, with the entire equipment line imported from Europe

2.2 Markets

In Vietnam, Hoa Phat Steel's business and production activities spread throughout the three regions: North, Central and South.Hoa Phat is a leading enterprise in steel production in Vietnam with closed blast furnace technology from iron ore to finished construction steel with modern technology lines of the world For many consecutive years, Hoa Phat Steel has held the largest market share in the country

Export markets are also increasingly expanding to diversify consumption markets for Hoa Phat steel products With a modern technological line, Hoa Phat Steel meets the strict standards of foreign partners and being competitive in the world market Up to now, Hoa Phat Steel has exported to 30 countries and territories across 5 continents

Besides exporting long steel, Hoa Phat Group also exports hot rolled steel coils, steel pipes and galvanized steel sheets of all kinds to the world market Typically, the first batch of hot rolled coil (HRC) steel arrived in Italy with a volume of 35,000 tons in early 2022, opening up a large consumption market for the HRC products of Group

In addition, Hoa Phat Steel is also exported to dozens of countries in Asia, Europe, and America such as India, Taiwan, Malaysia, Indonesia, Italy, Belgium, Spain, England, Portugal, America, etc

Phat in the galvanized steel market.

Sain In addition, in the hot rolled coil (HRC) steel segment, Hoa Phat's biggest

(HRC) Foreign competitors

Hoa Phat's biggest competitors in the foreign market are Chinese steel enterprises Although the production output of domestic steel enterprises is in surplus, the amount of steel imported from China is still massively landed This shows that Hoa Phat's competitive pressure does not only come from imported steel if it cannot shape

the input (production) and output (market)

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Although domestic production increased sharply, domestic companies also spent a lot of money to import steel of all kinds The largest import is from China, including products that domestic enterprises have produced, even in excess, such as construction steel, color-coated corrugated iron, hot and cold rolled steel coils

According to economic experts, the financial situation of Chinese steel enterprises in recent years is on the rise The price of billet and construction steel in China is even higher than in the Vietnamese market, thanks to policies to stimulate consumption and tighten supply Therefore, whether the Vietnamese steel industry is able to cope with Chinese steel or not depends on the investment and development policies of businesses to increase competitive strength

ll HOA PHAT’s SUPPLY CHAIN MANAGEMENT 1 Supply chain network

1.1 Suppliers

Hoa Phat Corporation's steel manufacturing thrives on partnerships with extraction leaders like Vale, Rio Tinto, BHP, and FMG These partners, with advanced automation and dedicated supply chain infrastructure, facilitate a seamless process A key 2021 milestone saw Hoa Phat acquire a 100% stake in the Roper Valley iron ore project, projecting a 4-million-ton annual extraction At the Dung Quat Steel Complex (DQSC), joint ventures with Wisdri for refining equipment and SMS Group for essential plant equipment underscore Hoa Phat's commitment to global excellence Additional contracts in Italy and Germany demonstrate a comprehensive approach to enhance steel production capabilities on a global scale.

1.2 Manufacturers

Stage 1: Iron Ore Processing

In this phase, iron ore, limestone, and coke are introduced into a blast furnace and heated until they melt

Iron ore is a mineral rich in iron oxide, consisting of various other elements, and is commonly

found in the forms of magnetite (Fe304), hematite (Fe203), goethite (FeO(OH).nH20), or

siderite (FeCO3) 98% of extracted iron ore is utilized in the steel production process Iron has a

material density of 7.874 g/cm3 and a melting point of 2,800°F (1,530°C) Stage 2: Formation of Molten Steel Stream

Two primary methodologies are employed in the production of steel: Basic Oxygen Steelmaking

(BOS) and Electric Arc Furnace (EAF)

The BOS method involves the introduction of recycled steel (scrap) into the molten iron within the furnace Subsequently, oxygen is compelled to traverse the liquid (a process known as Bessemer) to reduce impurities in the molten metal to levels ranging from 0.5% to 1.5% In the EAF method, recycled steel is conveyed into the electric arc furnace together with molten iron After this, the resulting product undergoes high-temperature heating, reaching approximately 1650 degrees Celsius, facilitating its transformation into high-grade steel

Stage 3: Secondary Steel Refining

Subsequently, the newly formed molten steel requires shaping and sizing adjustments to produce the final steel product

This is achieved through temperature adjustments or the elimination of specific factors, which may involve processes such as deoxidization, stirring, ladle injection, or argon bubbling Depending on the type of steel required, the following secondary steel production processes may be employed stirring, furnace refining, muc injection, deoxidization, CAS-OB (adjustment of components through a closed argon gas bubble with oxygen blowing)

Stage 4: Continuous Casting

At this juncture, the molten steel is cast into a cool mold, causing the steel shell to become thin and solidify The outer layers are withdrawn using guiding rolls, fully cooled, and solidified The resulting strands are cut to lengths as per user requirements For instance, plates for flat products (sheets and strips), beams for structural components, billets for long products (bars), or thin strips for wire systems

Stage fi: Primary Steel Formation

Also referred to as the primary steel forming step

The initial shape of the steel billet is crafted through various forms of hot rolling This process eliminates defects in the cast material to achieve the necessary shape and surface quality The hot-rolled products are subsequently divided into flat, long, seamless tubes, and more

Stage 6: Production, Fabrication, and Finishing of Steel

Ultimately, a series of secondary steel shaping techniques includes shaping, fabrication, joining, coating, heat treatment, Surface treatment

1.3 Warehouse

For a large conglomerate like Hoa Phat Corporation, effective warehouse management is one of the crucial factors to ensure smooth and efficient operations in production, business, and goods supply The warehouse management process of Hoa Phat Corporation encompasses the following steps:

them to ensure the quality and quantity Specifically, products entering the warehouse undergo scrutiny and classification based on type, size, weight, and various other

characteristics

storage areas Products are arranged and stored in various sections of the warehouse according to a scientifically and conveniently arranged plan

¢ Products and Warehouse Management: Hoa Phat Corporation utilizes professional

warehouse management software to facilitate quick, accurate, and efficient warehouse management This software allows warehouse personnel to carry out tasks such as inventory receipt, dispatch, goods inventory checks, batch tracking, and reporting on inventory status

© Products are coded and labeled for easy management, search, and distribution Product codes are generated through a professional and uniform process, enhancing the accuracy of goods management

© Furthermore, Hoa Phat's warehouse management system is integrated with modern technologies such as barcodes and QR codes to simplify goods management further

1.4 Distributors

Distributors are essential for companies as they facilitate market expansion, reach customers effectively, handle logistics, allow companies to focus on core functions, mitigate risks, offer cost efficiency, provide market expertise, represent the brand, respond quickly to market changes,

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and build valuable relationships with retailers and customers In essence, distributors contribute significantly to a company's success and competitiveness

The notable surge in hot-rolled coil production during the past month can be attributed to the positive signals in the demand for HRC in the market, particularly in the export sector Hoa Phat Corporation has exported HRC to numerous countries in Europe and Asia

In addition to the various types of steel pipes currently produced by Hoa Phat, the partner Johnson also imports molds sent to Hoa Phat's factory to manufacture specialized pipes tailored to specific usage requirements The products supplied to the partner will be exported from the Hoa Phat Steel Pipe Factory in Hung Yen With modern production lines and a quality management system compliant with ISO 9001-2015 standards, Hoa Phat's steel pipe products ensure high quality and aesthetic appeal for the partner's globally exported goods, making them a preferred choice for the partner

The Hoa Phat Parts and Equipment Limited Liability Company and the Vietnam Pile Enterprise Association have recently entered into a long-term strategic cooperation agreement regarding the production of prestressed steel products and flanges manufactured by Hoa Phat Under this agreement, Hoa Phat will supply a range of steel products, including various types of prestressed steel, flanges, steel straps, anchor heads, etc., manufactured by the corporation for all member plants of the Vietnam Pile Enterprise Association In return, the partner commits to encouraging association members to prioritize the use of all steel products from Hoa Phat and will place orders for production as new needs arise

2 Relationships within the chain

The relationships within the supply chain of Hoa Phat Corporation involve various entities and partners

Suppliers:

Hoa Phat Corporation sources raw materials from mining enterprises with substantial extraction capacities The corporation has established relationships with suppliers such as Vale (Brazil), Rio Tinto, BHP, FMG, and others for the procurement of iron ore Additionally, the corporation has acquired the Roper Valley iron ore project in Australia, signifying a strategic relationship with Australian mining entities

Manufacturers:

The manufacturing stage involves the processing of iron ore to produce steel Hoa Phat Corporation has engaged in joint venture agreements and collaborations with companies such as the Southern Technical Construction Engineering Company Limited (Wisdri) and the SMS

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Group (Germany) for the supply of steel refining equipment, plant installation, and the design and supply of pivotal plant equipment

Distributors:

Hoa Phat Corporation has a network of distributors that facilitate the market expansion and distribution of its products The corporation exports its products, including construction steel, hot-rolled coils, and steel pipes, to various countries in Europe and Asia Additionally, the corporation has partnerships with companies such as Johnson and the Vietnam Pile Enterprise Association for the supply of specialized steel products and prestressed steel products

3 Social and environmental responsibility

The Hoa Phat Hai Duong Steel Joint Stock Company provided explanations related to environmental issues in Hiep Son Commune, Kinh Mon District, Hai Duong Province The company emphasized its commitment to environmental protection and sustainable practices, including the use of closed blast furnace technology without waste discharge to the environment The company also highlighted its investment in modern treatment systems for water and waste, as well as various dust filtering methods to minimize environmental impact Additionally, the company mentioned its compliance with ISO 14001:2015 environmental standards and its commitment to using closed, cycle, and environmentally friendly steel production technology The document also referenced inspections by environmental authorities and independent inspection companies, which concluded that the steel complex did not cause pollution to the environment

Ill ANALYSIS ON HOA PHAT SUPPLY CHAIN MANAGAMENT 1 Synchronization

With a total initial capacity of 1.7 million tons, the 132-hectare Hoa Phat Iron and Steel Production Complex in Hai Duong was Officially inaugurated in August 2007 and split into three sections From iron ore to steel billet and building steel, this is the first closed, state-of-the-art, large- | scale iron and steel production project

undertaken by Hoa Phat Group

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