Alcoa's Strategic Transformation

Klaus Kleinfeld, CEO of Alcoa, spoke recently at NC State’s Wells Fargo Executive Series. His informal open style went over very well with students. But make no mistake – beneath an informal exterior, Klaus is aware of everything going on in his organization, and is well aware of the challenges ahead for Alcoa. With a PhD in Strategy, Kleinfeld is also aware of the importance of long-term planning, and the need for agility in a global supply chain.

Alcoa has about 60,000 employees around the world and consists of have three big businesses. Upstream consists of mining, refining, and smelting. Midstream involves rolling and providing processed aluminum to things like aerospace and beverage… and downstream, which is engineered product solutions. The middle and downstream businesses are growing, but the upstream segment is very tough right now. Commodity volatility and cost escalations is not a great combination for aluminum smelters.

Like ThyssenKrupp (a company I wrote about based on their CEO’s views two weeks ago), Alcoa is also seeking to transform their global footprint, in a very dynamic world. The company is undergoing a major plant construction in places like the Middle East and Brazil, – but is shutting down in high cost areas such as Italy and Spain. With a dynamic ecosystem going on – Alcoa’s growth is not up and to the right like Apple – but is more of a segmented growth in selected high growth regions of the world. Cost pressures are also making it prohibitive to operate in certain regions like Europe – not good news for countries already faced by heavy debts.

This has led to a position where procurement and supply chain are an important area for Alcoa’s survival. Their Chief Procurement Officer, Christie Brees, presented at an ISM conference two years ago, and I had the pleasure of seeing her speak on the innovative methods used to chase down and identify cost savings opportunities. These cost savings are directly tied to analyst expectations on Wall Street, making them more important than ever.

A discussion with Mark Davies, their head of shared services, reveals the potential for NC State to become part of Alcoa’s supply chain – their talent supply chain! Alcoa presents an opportunity for young people who have an interest in global manufacturing and in working for an integrated type of company that is facing challenges and is very diversified. The typical NC State student – with an engineering mindset and supply chain skills – is a good potential fit for Alcoa.