Metso Minerals
Background
Metso Minerals (part of the Metso Group) is the world’s market leader in rock and mineral processing equipment with a turnover of approximately €1.5b per year. Steel castings is one of the largest spend category currently sourced globally across the 5 continents. In order to rebalance a growing country risk as well as identify new cost reduction opportunities, Metso Minerals looked at China as a long term strategic source of supply for its large steel castings requirements.
Approach
- Selected steel castings part numbers representative of Metso’s total steel castings spend
- Segmented the sample set into 9 bidding packages
- Qualified through an RFI process 17 Chinese suppliers capable of responding to Metso’s requirements
- Run RFQ process with short listed suppliers to measure competitiveness of Chinese suppliers vs. current sources
- Developed detailed steel castings cost model of Chinese suppliers to confirm reliability of RFQ process
- Calculated total costs of delivery from ex-works China to Metso factories
- Develop business case for moving an increased volume of steel castings to China
Results
Identified 20% factor cost advantage for China vs. current LCC sources, mostly driven by advantages in labor and energy
Evaluated medium to longer term risk of moving to China (currency, materials and energy shortages)
Made recommendation for moving approximately 25% of the global steel castings spend to China with associated business case
Developed implementation plan for re-sourcing initiative
Proposed program governance structure for completing process over 18 months period