Outsourcing

BACKGROUND

The ongoing global financial crisis is a major wakeup call for the aluminium industry. The combination of lower prices and increasing manufacturing costs has dramatically changed the business landscape of the Industry by putting a number of the aluminium producers into a loss making position. In keeping with the global economic forecast, recovery for the aluminium industry is expected to be slow and volatile because of a significant inventory overhang and overcapacity. The profit squeeze and tough business environment for the aluminium producers is therefore expected to continue well into 2010 and beyond. Not unlike other industries, the aluminium producers have focused on cost reduction as a primary means for survival. In this respect cutback in manpower has been a significant cost reduction tool and productivity gains realized from these manpower cuts are expected to become permanent. It is further anticipated that additional productivity gains will be generated through outsourcing of key functions including: accounting, legal, purchasing, major maintenance and technology.

TECHNOLOGY OUTSOURCING

The level of technology outsourcing within the aluminium industry will depend on the size, organization, geographic location and cost structure of a given company. The independent and nimble aluminium producers that are open to new ideas are expected to extract maximum benefits from outsourced technology. Technology outsourcing will also be essential to smaller, non-integrated producers that do not have a full compliment of in-house technical resources to initiate and carry out major modernization and process improvement projects which are deemed essential to their survival amongst the major fully integrated players. Deployment of outsourced technology hence becomes an efficient and cost effective way to retrofit older plants with low risk proven technology in order to improve their profitability and extend their useful life.