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Accenture helped mining giant Anglo American create an integrated procurement function as part of its “One Anglo” initiative.
With Accenture’s help, Anglo American is well on its way to achieving its target of $1 billion in savings over three years, thus making great steps on its journey toward high performance.
Anglo American is one of the world’s largest mining companies focusing on platinum, diamonds, copper, nickel, iron ore, metallurgical coal and thermal coal. Headquartered in London, the company has approximately 107,000 employees in mining operations in Africa, South America, Australia, North America and Asia.
Anglo American, like most other mining companies, faced two major and substantially different challenges in recent years that placed considerable strain on its supply chain operations.
One challenge was securing supply to maximize revenue during a period of exponential growth. Prior to 2008, the mining industry experienced a massive commodity boom, during which time it was critical for companies to have access to the inputs they needed to extract and ship ore to meet market demand.
The second challenge was managing input costs more effectively to conserve cash and help retain profitability during the economic downturn.
Complicating these market factors were Anglo American’s organizational structure and culture. The company traditionally operated with a small corporate center giving its business units considerable autonomy to make decisions they thought were appropriate to maximize return. The downside of this arrangement was that, culturally speaking, it was difficult to get various business units to collaborate because they were focused on their own specific missions. Such a model created its own set of supply chain challenges that hampered Anglo American’s ability to respond to market pressures.
Upon assuming her position in 2007, Anglo American’s new chief executive officer, Cynthia Carroll, launched a “One Anglo” initiative designed to make the company work more closely as a single, integrated organization that could more effectively—and profitably— respond to changes in the volatile commodities market. The first area to be targeted for transformation was procurement, which was selected to spearhead the broader initiative due to its scope within the organization and the percentage of the company’s costs that it directly influenced.
The scale and complexity of transforming procurement in a geographically dispersed and decentralized company such as Anglo American required a rare combination of skills. Andrew Hinkly, head of the company’s supply chain organization, determined Accenture had that combination and hired Accenture to serve as Anglo American’s collaborator on what would be a three-year effort to build a world-class procurement organization.
Drawing on a wide range of global practices—including Supply Chain, Talent and Organization Performance, and Finance and Performance Management— Accenture brought to the project the capabilities and experience Anglo American needed to transform its procurement organization.
Accenture began its work by helping Anglo American understand its current procurement capabilities and developed a business case for the transformation. Accenture’s Supply Chain Mastery provided key insights not only on how high-performance businesses structure and run their procurement functions, but also how to optimize a global operating model for scale, value, flexibility and risk mitigation.
Anglo American also made considerable investments in employee training, which Accenture supported, providing comprehensive training in both soft skills—such as communications and structured problem solving—as well as functional supply chain-related skills (delivered via the Accenture Supply Chain Academy Learning Series) to enhance the capability of Anglo’s existing staff over time.
With Accenture’s help, Anglo American already has experienced significant business benefits that will only grow over time.
At the outset of the project, Accenture identified $1 billion in potential cost savings the company could generate by transforming its procurement organization over a three-year term. Within six weeks of kicking off the project, Accenture defined a set of initiatives that would enable Anglo American to achieve nearly 10 percent of the total savings.
At the end of the first year of the program, Anglo American generated $526 million in savings, with impressive year-over-year increases in savings reported midway through year two. These impressive results suggest the transformed procurement function is well on track to deliver the $1 billion savings target by the end of year three.
Overall, the company has benefited from new governance, culture and capabilities that help drive new ways of working. Accenture’s experience shows that programs such as these often flounder due to intangible factors rather than tangible challenges. By understanding and addressing these intangibles, Accenture was able to help the company successfully implement a highly complex and far-reaching change initiative while avoiding the myriad pitfalls that often plague such programs.
In the end, the results Anglo American achieved were the result of the company’s vision that it needed to make holistic and lasting change, and Accenture’s ability to help design and execute that change. Thus far, this has proven to be a winning combination that is helping Anglo compete more strongly in its markets and take major strides toward high performance.
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