Today commodities are moving back broadly into the global market balance but the challenges for the mining industry are far from over. In a world of more complex ore bodies, deeper mines, social and geopolitical risks, growing energy costs, resource nationalism and lack of infrastructure, global mining industry remains under exceptional pressure to control costs, boost efficiency and improve safety performance.
Rising cost is a cause of concern for the mining industry as the strategies of mining companies depend heavily on the current state of the market. Also, the rise in cost is resulting in the declining quality of ore and limited accessibility of new deposits. This will squeeze the supply in the years to come, potentially driving a commodity-price rebound as the global demand continues to rise. So, the companies need to analyze the new procurement trends in the mining industry that can offer exceptional opportunities for efficiency gains and can help in controlling costs as well.
At SpendEdge, we understand the impact that rapidly changing procurement trends can have on your mining business. And to help companies in the global mining industry to reposition their portfolios and excel in the competitive landscape, our team of experts has highlighted three procurement trends that have the potential to change the complete dynamics of the mining industry in 2019.
A leading public mining company wanted to make their supply chain more resilient to maintain topline revenue growth. To enhance their risk assessment capabilities, the mining industry client wanted to develop a risk assessment matrix that would offer a detailed view of supply chain risks and the severity of their consequences. A detailed quantitative analysis of various categories within the supply chain was carried out to prioritize risks and develop an effective risk assessment strategy.
About the Client:
The client is a leading player in the mining industry, specializing in public mineral exploration.
The mining industry client was facing challenges in devising an appropriate supply chain risk assessment framework.
How did SpendEdge Help the Client?
- Step 1: Offered expert advice and guidance on risk assessment
The initial step involved the development of detailed risk assessment guidelines. It included a range of tools and templates along with a detailed description of the steps involved in the process of risk assessment and risk treatment plans.
- Step 2: Classified and prioritized risks based on their impact on the processes involved in mineral exploration
The identification and classification of risks based on their severity helped the client address several issues that affected the flow of information throughout the global supply chain.
- Step 3: Devised a three-step approach that outlined the assessment framework
The scrupulous approach helped the mining industry firm to gain a holistic view of risk factors across their global supply network. It also enabled the client to identify specific risk factors in the mineral exploration category.
Key questions answered in this risk assessment engagement include:
Benefits of the Engagement:
The risk assessment matrix helped the client to gain an overview of various risk factors across their supply network. Our solutions also assisted the mineral exploration client to develop a strategic risk management approach to enhance supply chain efficiency. SpendEdge’s risk assessment matrix also offered a detailed lifecycle of risk factors and acted as a tool that helped the client to drive business value.
Why incorporate supply chain risk assessment?
The capability of an enterprise to effectively manage supply chain risks ultimately depends on its intentions and capacity to achieve those intentions. Developing a precise risk assessment framework helps organizations to assess the impact of each risk factor. However, a robust risk assessment framework should be aimed at enhancing the risk management capability of a firm.
SpendEdge’s risk assessment solutions help you do just that. It helps you to develop a responsive and bespoke approach to risk assessment. Our experts also offer recommendations that guide the development of appropriate tools and methods including the development of strategies that foster implementation, adoption, and enhancement.
Developing and implementing a successful supply chain risk assessment matrix may seem to be a harrowing and overwhelming process. To develop a robust assessment matrix and make it work, many aspects of the supply chain need to be examined in detail. Like our mining industry client, if your organization is also on the lookout for an objective way to enhance the efficiency of supply chain operations, risk assessment is the ideal approach to identify alternative and feasible ways to enhance performance.
The process of implementing risk assessment as the main aspect of your business strategy can affect business value. Moreover, such assessments help in the development of risk mitigation plans and enhance the ability to set contingency.
To know more about our risk assessment solutions
The mining industry client was facing challenges in identifying the most cost-effective blend of counter-measures to save themselves from a potential loss in the coal production category.
About the Client
One of the fastest growing mining industry firms, employing over 1500 professionals across various economies. Their main objective is to enhance value for stakeholders by discovering, acquiring, developing, producing, and marketing mineral resources profitably, especially in the segment dealing with coal production.
A leading firm in the mining industry, specializing in the coal production category, was looking at developing a cost model for realistic apportionment of costs incurred for each product and sub-products that are part of the operation. To do so and to enhance business efficiency, the client approached SpendEdge to help them leverage cost benefit analysis based solutions. A detailed quantitative analysis of various cost factors within the supply chain network was carried out to identify the indirect and direct spend categories.
Benefits of the Engagement
The cost benefit analysis engagement helped the mining industry client to understand the economic impact of inappropriate business decisions. The developed cost benefit analysis model helped them control indirect costs and save themselves from a potential loss. Our cost benefit analysis experts worked as an extension of the firm to uncover major opportunities for improving their sourcing strategies by controlling indirect and direct spend.
Importance of Cost Benefit Analysis in Procurement
Mining companies have spent several years ruthlessly reducing costs. On the bright side, this relentless focus is gradually translating into enterprise-level productivity improvements, with virtually all of the significant players targeting billions of dollars in cost savings. The past few years have put tremendous strain on the industry. Demands for efficiency have skyrocketed, while the means to invest in new programs to support such efficiency have often fallen away with prices. New technology trends in the mining industry, in the form of mining software and innovations in water resilience, are offering exceptional opportunities for efficiency gains and are worth investigating for adaptation across the sector. Apart from this, there are several procurement trends that the mining industry has been witnessing in the recent years. Here is a quick look through some of them:
Increased process automation
In the constant push for cost efficiencies and higher productivity players in the mining industry are re-examining processes and how they manage every aspect of their operation. They are also focusing on procurement trends, which include striving for greater visibility to gain an in-depth understanding of how they work and their workflow processes, in particular with contractors. The automation of procurement processes, which is considered as a significant cost saver due to its ability to overhaul the traditional way of managing supplier contracts and operations, is a more efficient way to improve governance, visibility, and control over contracts in real time.
Rising cost-cutting measures
Maximizing savings through procurement has always been of great importance in the mining industry, and this is one of the procurement trends still prevailing in the sector. As it continues to come out of a downturn, many companies in the industry are looking for new and more effective ways to shed costs further to improve operational efficiency in an unstable market. Furthermore, finding new ways to enhance 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. Hence, it is advisable for companies in this sector to tap into the expertise within the existing business to improve results.
Supplier relationship management
The change in the economy and ongoing uncertainty around the future of resource prices has caused many companies in the mining industry to look at existing supplier relationships and contracts and reconsider if they are the best option in the current market environment. Also, the cost is not the primary factor influencing companies to seek new suppliers. Companies in this sector are increasingly considering factors such as quality of the products or service as a critical factor. This indicates that, while many suppliers in the mining industry are trying to differentiate themselves currently only based on cost, it is clearly not the determining factor for most and other qualities are considered more critical to business.
To know more about the procurement trends and innovations in the mining industry
The past one decade has been a rollercoaster ride for companies in the mining industry. The commodity prices have reached both historic highs and lows, as well as operational realities shifted irrevocably in the face of the digital revolution. Mining companies better fasten their seat belts because those rapid changes are likely to continue and even accelerate this year as well. In addition, the industry’s commitment to strengthen balance sheet performance, reduce debt, and simplify portfolios, has resulted in record free cash flow, improved valuation metrics, and stronger shareholder returns. In many respects, the mining industry is once again poised for growth. As the mining industry’s value proposition is constantly called into question, mining companies have started to see that they cannot succeed in the future unless they change the way they operate. This goes beyond just enhancing efficiencies. It’s about re-establishing trust with stakeholders and collaborating to devise better responses. Here are some hindrances in the industry that mining companies can expect in 2018:
Data-driven insights to drive value
Once measured by how efficiently a company extracted resources, the value proposition in the mining industry may be shifting to how well mining companies act on information to optimize production, reduce costs, increase efficiency, and improve safety. It is becoming evident that success for mining companies doesn’t only depend on adopting the latest applications (apps) and technologies. Instead, it is also significantly dependent on embedding digital thinking into the heart of the company’s business strategy and practices to revamp the way corporate decisions are made. To succeed in this effort, mining companies need a clear vision of how the future digital mine might transform core mining processes, the flow of information, and supporting back-office operations. Hence, to deliver on the digital mine nerve center, mining companies need to develop the ability to use available data to resolve a wide range of business problems.
Changing customer, employee, and public perception
Mining companies operate under a legacy of weak environmental practices, fractious community relations, stock price underperformance relative to other sectors, and a historical lack of workforce diversity. Also, the public perception remains that mining companies contribute to environmental damage, cause a negative impact on the community, and engage in dubious practices abroad. Therefore, tarnishing the mining industry’s image. Also, negative perceptions can do more than damage reputations and affect stock prices. This mandates mining companies to take proactive steps to address and change their reputations.
Meeting shareholder expectations
As shareholder expectations grow, mining companies have started focusing on re-establishing their credibility among investors and analysts. Responding to rising shareholder expectations requires mining companies to walk a fine line. Although, it is vital for players in the mining industry to avoid decisions that can result in an erosion of value, shifting corporate direction to meet shareholder demand for short-term returns can result negatively in the long run. Mining companies can only win back investor confidence if they continually demonstrate the ability to deliver on their promises. This requires companies to improve their project management, forecasting, and reporting capabilities. Rather than prioritizing shareholder returns over all other corporate objectives, it may be helpful for mining companies to shift to a model that recognizes the breadth of functions they serve in the society. This includes activities ranging from generating shareholder wealth to providing employment, paying taxes, and contributing to local communities around the world.
Water management is one of the critical challenges that mining companies face. With each passing year, water has become a more crucial issue for the mining industry. The decline in ore grades results in the requirement of more water to extract the same amount of ore. The demand for water is also soaring globally due to population growth, industrial development, expansion of irrigated agriculture, and increases in per capita water consumption. So, it’s time for miners to improve their water management by rethinking their production processes and partnering with technology companies to incorporate and implement real-time water monitoring solutions.
To know more about the roadblocks that mining companies need to overcome
Overview of the global sand mining industry
Globally, the demand for sand mining is increasing owing to the recent rise in urban development and growing popularity of hydraulic fracturing technology. This recent increase in hydraulic fracturing activity, or “fracking,” to drill for oil and gas is expected to increase the demand for industrial sand since it is used to prop open fissures in the rock.
However, despite such promising growth prospects, our analysis of the global mining industry shows that sand mining companies across the globe are facing challenges in terms of:
- Technological capabilities: As technologies continue to proliferate, it becomes essential for companies in the sand mining industry to stay up-to-date of new developments to enhance production efficiency. Moreover, the unavailability of latest equipment can affect the extraction process.
- Scarcity of raw materials: The sand mining industry is nearing saturation with exponential growth in mining activities over the last couple of years. As a result, firms are facing supply shortages for the products among the end-user Moreover, businesses today are forced to maintain supply consistency in their products offered.
Several such factors are compelling firms in the mining industry space to leverage the use of supply chain risk analysis solutions. Supply chain risk analysis solutions help firms truncate their supply chain and improve: customer service, lead time, transportation risks, the risks associated profitability, and order-fulfillment times.
The Business Challenge and Journey
Client background: A UK-based sand mining company was facing challenges in terms lack of visibility for their import supply chain, a follow-on effect from a lack of shipment status reports. They were also facing issues with the customer’s de-centralized, direct dealings with local customs brokers (CHB), truckers, yards for storage, and inland container depots (ICD).
Client issue: High turn-around time and low visibility led to higher inventory requirements and high demurrage and detention costs. The overall difficulty in coordinating and managing multiple parties led to CHB issues, while the general unreliability of shipments reaching the factory on time created production delays, productivity loss, and bottlenecks.
To help the client reduce production delays, productivity losses, and bottlenecks, the supply chain risk analysis experts at SpendEdge conducted a comprehensive research and carried out discussions with prominent stakeholders in the mining industry.
Client journey: The client devised an integrated port-to-factory solution that would optimize the supply chain design, improve shipment visibility and control. Furthermore, the client integrated port-to-factory activities including shipment visibility, trucking, CHB, and warehousing.
Key questions answered in this supply chain risk analysis engagement
With the help of SpendEdge’s supply chain risk analysis solution, the sand mining client gained a ‘helicopter view’ of all processes, in alignment with their carriers. This has helped to minimize supply chain inefficiencies and improve the overall on-time deliveries.
To know more about our supply chain risk analysis solutions for mining industry clients
Over the years, players across the mining industry have started witnessing daunting challenges in terms of water scarcity, harsh climates, and rising energy costs which has consequently affected the growth prospects of the mining equipment manufacturers. As a result of these challenges, firms operating in the mining equipment manufacturing space have started advocating the need for robust procurement best practices solutions to gain a comprehensive understanding of their sourcing and procurement activities and increase their overall profitability across office locations.
With years of expertise in providing a wide array of similar solutions, SpendEdge’s procurement best practices experts assists firms operating in the mining equipment manufacturing space to gain a competitive edge over the peers operating in the industry space by implement best-in-class sourcing and procurement strategies.
The Procurement Pain Point and Insights Offered
A renowned mining equipment manufacturing client was facing predicaments in gaining a stronger foothold in the industry space against their peers. As a result, the client wanted to identify the sourcing and procurement best practices adopted by their peers. They also wanted to identify the key suppliers operating in the mining equipment manufacturing space.
To cater to the specific predicaments faced by the mining equipment manufacturing client, the procurement best practices experts at SpendEdge personalized an integrated research methodology, which included primary and secondary research coupled with quantitative and qualitative data collection methodologies.
During the course of the procurement best practices engagement, the mining equipment manufacturing client gained actionable insights into the functional and commercial drivers and decisions that impacted the profitability of the firm. Additionally, the client was able to categorize the peer group companies and key suppliers operating in the industry space. This helped them understand the accordingly implement sourcing and procurement best practices and formulate superior sourcing strategies.
Fundamental questions answered in this procurement best practices study include
The procurement best practices engagement helped the mining equipment manufacturing client instrument best-in-class sourcing and procurement strategies across the supply chain. This helped them identify and cut down the inefficient and unproductive processes and consequently helping them improve profits.