British Columbia Innovation Council

Even a company whose stock-in-trade is the most recycled material on the planet is impacted by market fluctuations. For example, a world-wide construction industry demand for steel may cease or it may be followed by a sudden world-wide reduction in automobile production. The requisite supply chain management strategies of a producer of heat treated forged steel grinding balls (which are used for the milling of ore in the mineral recovery process of the mining industry) are analyzed in this case study.

Located at the nexus of two railways and two highways in the Southern Interior of British Columbia, Moly-Cop Canada, a downstream supply chain operation, has often been caught in the middle of pendulum swings in the prices of both steel and scrap metal over the last 22 years. But its parent company, SCAW Metals Group, (which is part of the Ferrous Metals and Industries Division of Anglo American Plc), has insulated Moly-Cop from soaring raw materials costs by creating and controlling AltaSteel, a scrap metal company, which supplies Moly-Cop. AltaSteel also supplies other steel manufacturers during a scrap metal price rise. But when scrap metal prices are falling, steel manufacturers can draw from global markets and can focus on their core competency of manufacturing steel products. An ongoing evaluation must therefore take place; of how much vertical integration is required to hedge against the supply dependency and the cost efficiency of a focus on the company's core competency.

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