Quantitative Purchasing Structure for Ferrous Scrap Open Access

The majority of steel manufacturers within the United States have employed electric arc furnaces (EAFs), which melt raw materials, for the production of steel. The raw material used in EAFs is referred to as steel, or ferrous, scrap. There are many different grades of ferrous scrap, which are classified by the following attributes: size, density, and chemistry weight percentages of residual elements. Methods currently applied to assess the price of ferrous scrap employ qualitative measures. Furthermore, the largest unknown when procuring ferrous scrap is the chemistry weight percentages of residual elements. This attribute is the most critical to the steel manufacturer as it affects the quality of steel. The goal of the research conducted for this praxis was to create a pricing model that predicted the value-in-use price of ferrous scrap per supplier using a quantitative purchasing structure. The solution to this problem was attained through a pricing model. As this research was applied, the pricing models developed during this research are readily available for use within the steel industry. Results from the pricing models displayed a significant improvement in predicting the value-in-use ferrous scrap price over the current procurement process used by the steel manufacturer.

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