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Case Type 2 ::The Alcan LM3 Project
Fri 23rd Jan 2009, 10:43am
The Alcan management team in conjunction with the North East Centre of Excellence and Northumberland County Council has undertaken an LM3 benchmarking exercise to obtain an indication of the impact of Alcan’s spend on the local and regional economy using a methodology developed by the New Economics Foundation.
On 23 October, 2007, Rio Tinto, the world’s leading mining and minerals company, completed its acquisition of Alcan. The new aluminium product group of Rio Tinto, Rio Tinto Alcan, is the world’s largest aluminium producer and the number one ranked bauxite producer . With large, long-life, low-cost assets worldwide, a strong portfolio of growth projects, leading smelting technology and a diverse talent pool of 73,000 employees in 61 countries worldwide, Rio Tinto Alcan is well positioned to exceed its customers’ needs and is deeply committed to ensuring the economic, environmental and social sustainability of the communities in which it operates.
Alcan Aluminium UK Limited, a part of Rio Tinto Alcan, is the largest private sector employer in Northumberland with a predominantly local workforce of around 670 employees. The Lynemouth Smelter annually produces 180,000 tonnes of primary aluminium for use in the aerospace, automotive and packaging industries. The Lynemouth Power Station, which produces electricity for direct use in the Smelter’s manufacturing process, generates 420MW of energy and is the most thermally efficient coal-fired power station in the UK.
Northumberland County Council initiated a project in 2004 called the LM3 Project, its objective was to measure and assess the actual and potential impacts on public sector procurement mechanisms and effectiveness in Northumberland using LM3 local multiplier tool. This tool was developed by the New Economics Foundation, who was a partner in the project. In particular the project was interested in whether the tool can be used to derive objective evidence of the benefit of local procurement for the community of Northumberland. This project became a national leader and exemplar.
The management of Alcan and Northumberland County Council agreed that it would be particularly useful and of immense interest to a variety of partners not least the Regional Development Agency, One North East to apply that tool and measure the current impact of Alcan not only within its locality but also on the whole of the North East Region. The Alcan management team in conjunction with the North East Centre of Excellence and Northumberland County Council has therefore undertaken an LM3 benchmarking exercise to obtain an indication of the impact of Alcan’s spend on the local and regional economy.
In summary the results indicate that:
- The total income generated for the local economy surrounding Alcan from Alcan’s activity was £60.9 million per annum.
- The total income generated in the regional economy of the North East from Alcan’s activity rises to £118.5 million per annum.
- The above prudent evaluations are based on an iteration of direct spend and 1 iteration of respend. However including a further iteration of spend and an LM3 evaluation excluding turnover then this increases the income generated for the local and regional economies to £79.7m and £171.0m respectively. This still however remains a prudent evaluation based on direct spend and 2 iterations of respend.
- Every £1 in total spent by Alcan contributes £0.79 to the local economy and £1.54 to the regional economy.
- The results highlight that Alcan’s direct spend with local suppliers is £15.8m and for regional suppliers £40.7m. This is a significant and ground breaking piece of work for a number of reasons. The conclusions and suggestions show how Alcan can use this information to not only show how its activity benefits the local and regional economy but to examine how it can actively increase that benefit by incorporating increased local and regional suppliers within its supply chain.