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Mining Procurement: 3 Trends You Need to Know

As the mining industry continues to emerge out of a downturn, procurement and supply remains a critical part of mining business ability to succeed and r...

|Apr 6|magazine11 min read

As the mining industry continues to emerge out of a downturn, procurement and supply remains a critical part of mining business’ ability to succeed and remain profitable.

So what areas are mining companies focusing on to tighten cost control, efficiency and productivity through procurement? We’ve complied three trends you need to know for mining procurement in 2015.

1. Automating processes to increase efficiency

In the constant push for cost efficiencies and greater productivity miners are re-examining their processes and how they manage every aspect of their operation. They are striving for greater visibility in order to gain a deep understanding of how they work, who works, and their workflow, in particular with contractors.

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The automation of procurement processes, which is deemed as a big cost saver due to its ability to overhaul traditional way of managing supplier contracts and processes (i.e. delving into realms of paper), is a more efficient way to improve governance, visibility and control over contracts in real time.

According to Mining IQ’s 2015 Procurement and Supply Chain industry report, nearly half of all respondents said automation and standardization of procurement is vital to business improvement in 2015. The report also revealed automation a of procurement processes to improve efficiencies was ranked by respondents as the number one priority for mining procurement activities in 2015.

2. It’s time to cut costs even further

Maximizing savings through procurement has always been important in the mining industry. As the sector continues to come out of a down-turn, many companies are now looking for new and more effective ways to cut costs even further to improve operational efficiency in an unstable market.

According to Yolanda Di Rosso, regional contracts manager at Barrick Gold, finding new ways to improve savings through procurement contracts can be challenging in a climate which leaves many mining companies without the necessary budget to invest in new technologies or resources needed to meet KPIs.

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“A few years ago we came to the conclusion we were in a position where we couldn’t hire more staff to come in and work on a special project, and we simply didn’t have the money at that point to engage in an external consulting firm to help us,” said Yolanda.

As a result, Yolanda and her team took a hands-on approach and created a ‘spending roadmap’ for procurement teams across Barrick’s organization, a model which is based on tapping into the expertise within the existing business to improve results. Many mining companies seem to be in the same boat as Yolanda and her team when it comes to cost cutting--2015 will be the year that many look for new ways to decrease costs even further.

3. Cost is not the only differentiator when it comes to supplier relationship management

The change in economy and ongoing uncertainty around the future of resource prices has caused many mining companies to look at existing supplier relationships and contracts and determine whether they really are the best option in the current market environment.

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It’s easy during tougher times to assume customers swap contracts or suppliers based on cost only. However, Mining IQ’s Procurement and Supply Chain industry report revealed that cost is not the main factor influencing companies to seek new suppliers. When asked which factors most influence the decision-making process when switching to a new supplier, over 40 percent of 2015 respondents said that quality and product service were number one.

This shows that while many suppliers are trying to differentiate only on cost at the moment, it is clearly not the determining factor for most and other qualities are considered more business critical.

Previously posted on MiningIQ.com.