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| European Head Office Metal Purchasing |
Context / Scope of project
Client operated the commercial operations for an integrated base metal mine-mill-smelter-refinery system. They had responsibility for buying custom feeds that could be added at various points in the production process. At the time, the system had excess cobalt refining capacity and cobalt prices were high. In addition, there were significant, unprocessed inventories of material already sitting at the smelter.
The challenge was to increase the volume of cobalt produced while also improving profitability and involving both commercial headquarters and the processing operations. In addition, the team needed to install the systems, processes, accountabilities and reviews that would enable the client to continue to adjust their decisions over time as supply and demand of various metals altered.
Client achieved:
- Over 100% increase in tonnes of cobalt produced from custom feed sources
- Approximately $50 million in additional, annualised revenue generated from improved custom feed production
- 14% increase in average profit per tonne of custom feed material fed into the smelter converter aisle
- 17% increase in unit profit of the product being purchased by commercial buyers
- Greatly increased focus on profitability as the driver of on-the-ground operational decisions at the smelter through regular, fact based reviews of profit-focused KPIs
- Introduction and regular monitoring of buyer profitability KPIs
- Enhanced transparency of end-to-end profitability impacts of head office decisions, with buyer performance measured against bottom-line results
- New, structured, fact-based mechanisms for communications and decision-making between commercial headquarters and the operations.
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What we did:
- Established Value Driver Trees, shared by both Commercial Headquarters and the Smelter, showing the profit implications of the week’s decisions
- Realigned the smelter inventory management and processing prioritisation systems to focus on profit (rather than operational convenience)
- Established weekly review meetings across both commercial headquarters and the smelter, discussing materials purchased and processed that week
- Increased, shared visibility between commercial and operations on the profit impacts of buying and processing decisions
- Introduced buyer profitability measures and published results, building sense of friendly competition to buy the most profitable input materials
- Created a shared sense of purpose around a common set of profit-focused KPIs between commercial headquarters and the processing plant.
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