Considering increasing volatility and uncertainty, without combining and automating operations, and marketing requirements to optimise supply chain, mining companies are likely to experience low profit and productivity, in addition to poor product quality
It has been observed that mining companies that did not streamline their supply chain management processes from pit to port, during the height of the commodities market boom, got less revenue than their competitors.
This should not be surprising.
What has emerged from different views gathered from supply chain industry specialists that African Mining Brief contacted is that most of the mines that registered lower profit margins had (sadly still have) a disjointed supply chain management system. For instance, there is a haphazard or virtually no coordination between critical areas such as planning, production accounting and others. Basically, what are supposed to be managed as different parts of a whole are operated autonomously.
Unquestionably, a mine’s efforts to optimise its supply chain can only be effective once it identifies unique challenges across its operations and devises ways to manage them. It has to be noted that, in mining, supply chain also includes inbound issues, in particular, managing the supply chain or incoming maintenance parts.
In an interview with African Mining Brief, Ansophie Strydom, Senior Manager of Integrated Communications at SAP Africa, underlines three main challenges which mining companies face – optimising mine operations, sales and supply chain management and operational risk and compliance management.
- Optimised Mine Operations: Eroding margins from lower-quality reserves and inefficient extraction, production, and supply chain processes from the boom years.
- Sales and Supply Chain Management: Missed revenue opportunity due to lack of visibility into product assays, transportation networks, and situational factors in dispersed locations.
- Operational Risk and Compliance Management: License to operate at risk due to ineffective documentation of compliance with constantly changing regulations and the need to maintain safety and training protocols in dispersed locations.
Whereas determining mineral resources and prices in the current volatile times is entirely of its hands, at the very least, a mine should be able to effectively manage the resource-to-market chain. So, to effectively address the common challenges they face, Strydom suggests that mines should adopt five main ways to optimise their supply chain. “The following steps are critical: Profitably drive volatile commodity sales, globally manage complex supply chains, gain insights into operations, safely optimise asset performance & utilisation, and last but not least, simplify IT to unlock business innovation.”
The “one-size-fits-all” myth
Strydom dispels the popular misconception of “one-size-fits-all” in supply chain management across the diverse portfolio of minerals. However, she says, instead, standardised supply chain business practices that should be adopted across the board.
“Adoption of standardised practises enable mining companies to address the current market realities. More importantly, such business practices must be delivered via a single technology platform that can serve as a platform for business innovation,” she explains.
Specifically, Strydom believes the following supply chain management technologies could prove handy to mining companies:
- Leveraging the Internet of Things for delivering real time insights across the supply chain
- Connected Supply Chain for Pit-to-Port
- Leveraging Big Data to drive greater insights and more effective decision making
- Embed Mobility in all business processes
- Drones for measuring and surveying stockpiles
Supply chain management optimisation should be a necessity, Strydom recommends. Considering increasing volatility and uncertainty, without combining and automating operations, and marketing requirements to optimise supply chain, mining companies are likely to experience low profit and productivity, in addition to poor product quality, she warns.
“As margin pressures from inefficient and expensive production processes are worsened by volatile, difficult-to-predict commodity prices, leading mining firms must rise to meet the challenges posed by legislative limitations, strict regulations, and safety, environmental, and local community concerns,” she says. “They must streamline their operations while continuing to innovate.”