Ausdrill has taken advantage of the downturn in mining, taking the opportunity to grow a culture of innovation and lean thinking: this has partly been achieved through an IT-driven, end-to-end transformation in its supply chain
Founded in 1987 by Ron Sayers with just a single drill rig at Kalgoorlie, Ausdrill has grown to become one of Australia's top 200 companies, listed on the ASX and counting the major mining companies including AngloGold, BHP Billiton, Barrick, Gold Fields and Newmont in its client list. Its rapid growth has been achieved mainly by acquisition, and today the group embraces 19 businesses located across Australia as well as major interests in Africa including a half share, with Barminco, in African Underground Mining Services (AUMS).
Ausdrill has been affected in common with the entire mining services sector by the retrenchment in exploration and production following the recent slump in commodity prices. Though Africa has bounced back and Australian gold prices have firmed this year sparking renewed activity, in all its markets Ausdrill is facing greater competition. As Group Contracts and Procurement Manager Ashley Carey puts it, smaller players are desperate for any work to keep them going and are creating a price environment that, though unsustainable, skews the market in the short term.
Carey and his colleague, financial controller Renée Harrold, have taken a lead role in easing the company through some very difficult times and refining its procurement processes and culture to a point where it can take full advantage of the upturn that can't fail to materialise in this notoriously cyclical business. As Carey says: “The downturn has been a blessing in disguise: it has brought the supply chain to the top of the agenda. Without the downturn we may not have had the traction to drive the changes we've made over the last two years. Bad times breed good businesses and that is very true in our case”
A case for refinement
With plenty of work around, and the highest standards of customer service, there had not been the incentive to introduce what might be called joined up thinking. There was very little communication between the businesses in the group, and when it came to procurement, every one of some 58 individuals scattered across Australia was entirely focused on his or her own cohort of users and suppliers. The supply chain function was entirely process driven: suppliers may have been taking advantage of that segregation and charging higher prices, and service levels were not as good as they might have been. “Our first task was to understand what we were spending money on, and look at the total global spend of the group,” he says.
Not surprisingly this exercise delivered sizeable savings. It also highlighted that suppliers were not always realising the spend level they anticipated. Capturing procurement data across the group began to give insight into the supplier community. But the first thing to tackle was the group-wide structure. “We started on a three and a half year project to centralise procurement,” Carey says. “We built a communication channel through a basic SharePoint based requisitioning system, and rolled that out in a small group of companies, reducing their procurement workforce from eight to two. It was the start of something big for Ausdrill.”
This was a key moment because it enabled his team to convince the board, generally conservative in attitude, of the enormous savings potential of IT – he identifies this as the point where innovation tailored to the business, as opposed to taking the cue from its large mining clients, started to be accepted as a strategy that could be applied across the group.
Coupling with Coupa
After 42 months, Ausdrill had a centralised procurement function, administered by thirteen people, four in Kalgoorlie, one in Queensland and eight in Perth. The workload is no lighter than when 58 people were needed to handle it, despite the market downturn he points out. The quest for technology-based solution was clearly essential, though arriving at the right one took some effort. The industry has a number of incumbent solutions including Ariba, Quadrem and Basware – Ashley Carey and the team embarked on a two year project to identify the best partner for Ausdrill, visiting government, private, finance sector and of course mining users to analyse exactly how these solutions integrated with their core systems and how easy they were to use. In the end, it was a bold decision to pioneer a system that had not previously been adopted by any Australian company.
There was a risk to choosing a cloud-based solution when Ausdrill's existing Pronto ERP system had not been asked to integrate with any external software, but in the end the US based Coupa 'value-as-a-service' platform ticked all the boxes including scalability, flexibility, ease of use and return on investment. “Coupa is probably the most cost effective software available on the market,” says Renée Harrold. “Since we adopted Coupa, more of the majors in Australia are looking at it. It is a cloud based solution that works.” She and Carey have been jointly project managing the phased implementation and have found it infinitely adaptable. It delivers on the original requirements – for example it took only 18 months to roll out to some 1,300 users in 18 diverse businesses, and since it takes up little bandwidth it's ideal for field use over tablets and handheld devices – but like a mining resource 'open at depth' it can be expanded by its users.
Phased implementation helped the businesses to digest the new programme gradually agrees Ashley Carey. “We introduced electronic requisitioning through from a request to a purchase order. The actual receipting of goods was still happening in our Pronto ERP and we simply matched that back in to Coupa so we didn't have to train any of our stores people on how to receipt. On the supplier side, we tried it out in a couple of larger businesses, so about 70 percent of the invoices for these two subsidiaries are now loaded direct by their suppliers. Part of the vendor optimisation programme we are embarking on now will look at how to integrate their systems with ours so it takes out more manual handling.”
Training was relatively straightforward, continues Renée Harrold. “Ashley and I conducted one hour sessions in rooms around Australia. We showed the team the procure-to-pay picture and how Coupa sat in that picture. We then presented some examples relating to the people we were training – for example with workshop fitters we would focus on the types of parts they work with. We set up a Coupa blog and discussion forum on our intranet where people could find a one page 'how to' guide, print it out and put it on the wall. That was enough to get them started using the system. We tell them that you can search like you do on Google and buy like on eBay”
Coupa users are Coupa developers, a fact quickly picked up at Ausdrill, which won a Coupa Innovation Award in May this year for the way it has rolled out the system and pushed out its boundaries. One of Ausdrill's systems administrators James Bargerbos was declared Coupa Community Champion for demonstrating that community is not limited by geography by helping other Coupa users around the globe. “It's almost like a crowd sourcing platform,” says Harrold who represented Ausdrill at the San Francisco Coupa Inspire event. “Users can log on and download features that they like and find useful. They can get into the community and influence its future - that is how it has developed, by being led by the users rather than presented as a centrally prescribed package.”
The investment decision has been vindicated, adds Carey. “The Coupa overlay has been the bedrock of our transformation, allowing us to refine and automate our processes. Our target is 70 percent automation of the procurement processes, and that will only need four full time procurement officers, balanced by a few more people in the group dedicated to contract management and cost optimisation. That is the next step in making this a truly lean company.”
Attention has now turned to a vendor optimisation programme. Here the target is to knock a nought off the current 4,000 strong vendor base, with 80 percent of the spend focused in between 50 and 80 key partners. “We are taking this journey hand in hand with these vendors because we want them to reap the benefits of cutting out manual processes and communicating effectively over systems that talk to one another. Our vision is to be able to transact seamlessly with these partners, with minimal human intervention.”
The supplier community needed some convincing to get them on board. Carey and Harrold travelled the length and breadth of Australia with a roadshow at which every vendor had the opportunity to learn at a face to face session and have their questions answered. Some reluctance was to be expected. Suppliers often have to pay fees to access client systems, and even have a percentage of each invoice passed to them. With that in mind, Coupa is free to Ausdrill's vendors.
Ausdrill has become a more dynamic company at all levels. It is more competitive. This is a business on a never-ending quest for improvement. By the end of this year all the Australian businesses should be equipped with the hardware they need to move out of paper-based requisitioning and getting used to completing a purchase in minutes instead of hours. In 2017 Carey wants to see Coupa rolled out to the African business, something that will present a new set of issues to integrate it with the Pulse ERP used there.
The system has already paid for itself, but Harrold and Carey are hungry to see it do much more. “As a global company, we need a global procurement programme.” Coupa is delivering value in ways not foreseen when the decision was made to invest in it. The data from the field is already making management information and schematics available across Australia, and further innovation in in sight. For example, in the near future Ausdrill's field staff will be able to order purchases directly from exploded diagrams – meaning a part can be ordered at a touch with no form filling.
Coupa is just a tool, but it is one that has given all its users the ability to proactively pare down cost, save time and make processes leaner and more dependable. They will have to get used to taking more control over the outcomes of their work, but that change is gathering traction, says Ashley Carey. “Other contractors in Australia are looking at what we are doing and taking notice. The more people we can get behind us the more we can push the tool to do more things. I have no issues making the mistakes and overcoming them because I am convinced that will help us stay ahead of our competitors.”