A global mining and metals company that was setting up aluminum smelter operations in India set a capital cost target 50 percent lower than the industry’s global average. The company then empowered its project teams to reach the goal—for example, by giving them greater freedom to make decisions about capital specifications and which low?cost equipment suppliers to use. (A technical and commercial audit team of senior managers ensured that the new approach didn’t compromise the quality of capital equipment or backfire in the form of graft.)
Moreover, the company did not give the contract out on an EPC basis. Instead, it brought together a mix of Chinese and European companies (BEST OF BEST!) to finalize the design and to supply the equipment needed, and the integration and commissioning work was done in?house, thus saving much of the margin that would otherwise have been given away. Together, these moves helped the company to launch its Indian smelter operations at a capital cost 50 percent below industry averages (and 20 percent less than other players in the same market spent).
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