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Spend Reduction Kaizen

Using Kaizen to Reduce Supply Chain Cost

Project Description

Situation

A network of mining operations across North and South America and the Caribbean was threatened with closure as a consequence of their uncompetitive cost position.

The business needed to increase the operations’ cost competitiveness through significant spend reduction for purchased goods and services.

Approach

(1) Mine historical spend data to identify the largest spend categories and vendors, organize in a Pareto to capture the top 80% of spend.

(2) Organize Kaizen workshops with all relevant stakeholders at the mines, including maintenance, engineering, operations and procurement resources.

(3) Gather and prioritize spend reduction opportunities from the workshops.

(4) Assign and follow up with those responsible to execute the high priorities.

Results

(1) Identified $5.5M (>13%) of spend reduction opportunity on $42M of annual spend.

(2) Created clear accountability and plans for execution on the actions required to realize these high priority opportunities.

(3) Tracked results during execution, resulting in gains that significantly exceeded the originally identified spend reduction potential.

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