Inside the Strategic Sourcing Transformation at AngloAmerican – Part 1

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MetalMiner is pleased to welcome Jason Busch, editor of our sister site Spend Matters.

MetalMiner affiliate site Spend Matters sent a representative to attend Emptoris’ annual user conference in Boston earlier this fall. Emptoris is a provider of sourcing, contract management and related technologies to help procurement organizations better negotiate, contract and gain visibility into their direct, indirect and services purchases. AngloAmerican recently signed a large relationship deal with Emptoris as a component of a broader sourcing and procurement cost-reduction initiative. From a systems perspective, AngloAmerican is investing in five distinct technology areas.

These are contract management, strategic sourcing, spend analysis, transact-to-pay (T2P) and master data management (MDM). Emptoris is providing the first three areas of software for AngloAmerican. These cost-reduction and visibility-enabling tools will sit on top of two ERP systems at AngloAmerican across more than a dozen instances of SAP and Eclipse. Along with these tools, by investing in the right skills, programs and people, AngloAmerican hopes to become the “industry leader and global benchmark for supply chain value creation” and has targeted the implementation of over “$1 billion of additional value by the end of 2011.

AngloAmerican’s sourcing-led plan started in 2008. It focused on three key areas:

  1. A “new operating model that would leverage a combination of category management and strategic sourcing to reduce costs
  2. Consistent processes, governance and a supplier performance management (SPM) framework
  3. Investing in teams and individuals within teams to deliver results

To drive savings, AngloAmerican identified 70 categories working with the various business groups (platinum, diamonds, copper, nickel, iron ore/manganese, metallurgical coal, thermal coal and “other mining/industrial) to pursue in a “manageable, understandable and consistent way. In addition to better process, automation and negotiation, the organization planned to rely on three distinct sources of value to drive savings: total cost of ownership (TCO) reduction, arbitrage opportunities and low-cost country sourcing (LCCS). The category teams would then create a strategic approach to leveraging spend within and across business units, taking full advantage of the 500 procurement team members that were part of the AngloAmerican team.

We’ll share additional commentary and lessons from AngloAmerican’s presentation and procurement transformation in the coming weeks, including their new themes and focus areas such as improving community relations and local procurement (e.g., micro-credit) to work with smaller and often disadvantaged (as we would call them in the US) suppliers.

Jason Busch

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