NLMK Group, Russia’s largest steelmaker is to launch a pilot project for outsourcing internal logistics for its long products division.

The plan is to use Freight One, Russia’s largest rail freight operator to manage railway transportation at the company’s Urals sites (NSMMZ and NLMK Metalware) and lease rolling stock from NLMK Group and manage the railway department shared by the two plants. Track and locomotive maintenance will be included in the plan.

NLMK Group believes the outsourcing project will reduce costs by 8% and will fall into line with the company’s Strategy 2017, which is designed to improve efficiency across all production a business processes.

“We have successfully implemented similar projects at the Lipetsk site,” said Sergey Likharev, NLMK Group’s vice president for logistics.

At Lipetsk, claims Likharev, NLMK saved 13.8 million rubles per year by outsourcing car transport, but argues that the Freight One project is more complex because it involves outsourcing railway transportation, which is part of the production chain.

“We are certain that with a partner like Freight One we will achieve the goals we have set,” he added.

Freight One’s executive director Alexander Sapronov was equally upbeat about the plan, claiming that it means further expansion of industrial logistics for the rail freight business.