Decarbonization in steel supply as a competitive advantage in a mechanical engineering company
Vihijärvi, Simo (2021)
Vihijärvi, Simo
2021
Master's Programme in Industrial Engineering and Management
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2021-11-23
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202111138389
https://urn.fi/URN:NBN:fi:tuni-202111138389
Tiivistelmä
The pressures on environmental sustainability has been recently increasing. Even though these practices have been seen deteriorating profits of the companies by increasing costs, several research suggest the opposite. As steel industry is one of the largest emitter of car-bon dioxide globally, decarbonizing the steel supply could provide a sufficient mitigation of emissions in mechanical engineering companies that heavily rely on steel. However, as the technologies towards decarbonization can be complex with some of them just emerging, the costs of the low emission steel are seen rather high. Additionally, there is a lack of research on the competitiveness of decarbonized steel supply, which could create benefits for the manufacturer and the customer.
Hence, this master’s thesis studied the potential of decarbonized steel supply as a competitive advantage for mechanical engineering companies. The main objective was to identify the impact of low emission steel on total emissions, costs, and on the customer value perceived. The case was conducted for a global company that relies heavily on steel structures in the products manufactured in Europe and China. For the assessment, a thorough review of the phenomena was conducted, and a model for assessing the competitiveness in the steel supply chain was built.
This approach of this thesis was a qualitative utilizing the aspects of a multimethod single-case study. The data was collected utilizing different databases containing for example real-life data of the emissions of steel. Moreover, the existing data from the case company was utilized for better linking the phenomena to the case company. Additionally, qualitative inter-views were conducted for understanding the customer perspective of the phenomena.
By linking the emission data to the internal data of the case company, baseline emissions for the steel supply chain were estimated with the estimated cost of the steel. The impact of decarbonization was evaluated with two different scenarios; first utilizing low emission steel currently available and second, utilizing fossil free steel. The impact of these was estimated by the change in emissions and costs concerning two products types of the case company manufactured in Europe and China. These results were reflected with the results from the customer interviews.
The calculations showed that utilizing either partially or fully decarbonized steel in the sup-ply chain could lead into significant emission reductions with no major impact on the total costs of the case company. However, it was found out that no sustained competitive ad-vantage could be achieved by the decarbonization. The results of the interviews showed that currently decarbonization of the steel supply is not perceived valuable by the customers. Thus, from the perspective of the increased sales or decreased costs it was seen not to create competitive advantage.
The internal data of the case company used consisted of estimations for the year 2019. When comparing these with general averages of the steel emission and cost values, the calculated results could only be viewed as directional. Moreover, as there was no transparent view of the entire steel supply chain, assumption were made with several processes and values. This then opened the opportunity for future research to better studying the actual supply chain with more accurate values. In addition, based on the results, the impact of eco-design, which could lead into more significant emission and cost reduction, could be further re-searched.
Hence, this master’s thesis studied the potential of decarbonized steel supply as a competitive advantage for mechanical engineering companies. The main objective was to identify the impact of low emission steel on total emissions, costs, and on the customer value perceived. The case was conducted for a global company that relies heavily on steel structures in the products manufactured in Europe and China. For the assessment, a thorough review of the phenomena was conducted, and a model for assessing the competitiveness in the steel supply chain was built.
This approach of this thesis was a qualitative utilizing the aspects of a multimethod single-case study. The data was collected utilizing different databases containing for example real-life data of the emissions of steel. Moreover, the existing data from the case company was utilized for better linking the phenomena to the case company. Additionally, qualitative inter-views were conducted for understanding the customer perspective of the phenomena.
By linking the emission data to the internal data of the case company, baseline emissions for the steel supply chain were estimated with the estimated cost of the steel. The impact of decarbonization was evaluated with two different scenarios; first utilizing low emission steel currently available and second, utilizing fossil free steel. The impact of these was estimated by the change in emissions and costs concerning two products types of the case company manufactured in Europe and China. These results were reflected with the results from the customer interviews.
The calculations showed that utilizing either partially or fully decarbonized steel in the sup-ply chain could lead into significant emission reductions with no major impact on the total costs of the case company. However, it was found out that no sustained competitive ad-vantage could be achieved by the decarbonization. The results of the interviews showed that currently decarbonization of the steel supply is not perceived valuable by the customers. Thus, from the perspective of the increased sales or decreased costs it was seen not to create competitive advantage.
The internal data of the case company used consisted of estimations for the year 2019. When comparing these with general averages of the steel emission and cost values, the calculated results could only be viewed as directional. Moreover, as there was no transparent view of the entire steel supply chain, assumption were made with several processes and values. This then opened the opportunity for future research to better studying the actual supply chain with more accurate values. In addition, based on the results, the impact of eco-design, which could lead into more significant emission and cost reduction, could be further re-searched.