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.
The supply chain in modern companies is increasingly complex and dynamic in nature. From suppliers and industries to raw materials and commodities, there have been steady changes taking place across the supply chain of new age companies. Furthermore, the increasing uncertainty in the economic markets are forcing organizations to closely monitor market conditions and respond appropriately through improved supply chain strategies.
Traditional ERP systems are undoubtedly highly useful management tools, but they are mostly blind to external data. Their “inside-out” approach can leave companies inadequately equipped when planning and executing competitive supply chain strategies. However, with the advent of new market intelligence tools can resolve this problem. With the help of supply market intelligence, ERP systems can now incorporate real-time insights on suppliers, customers, and competitors, thus creating a perspective to reduce risk and create a competitive advantage. Here are just five benefits companies can realize with a market intelligence intelligence-driven supply chain.
Improved supply chain strategies
It is vital to take into consideration the impact of potential events before undertaking supply chain planning. For instance, factors such as a sudden increase in demand, or in the event of any supplier undergoing a catastrophic event, companies must be able to be prepared to handle such situations. Market intelligence provides early warning signals and unique insights into events that are likely to occur. Furthermore, it can also help in assessing alternative suppliers and approaches. This prepares companies to handle unforeseen contingencies better.
Competitive advantage often comes to companies who are more agile, nimbler, and react faster when compared to their peers in the market. In fact, a quick reaction to unforeseen disruptions is the route for modern companies to gain a competitive advantage. For instance, if a particular supplier is struggling to meet the company’s demand, they can quickly move to an alternative. Or, if a key component may be difficult to procure, companies can lock up the supply before the competitor does. Market intelligence via real-time alerts is key to achieve this as it gives faster insights for companies to be prepared for contingencies in the future.
Supply chain risk is an inevitable component of a business, and these risks evolve and become more prevalent with time. In this dynamic scenario, yesteryear’s supply chain risk management strategies often prove to be ineffective. Businesses having a poor grasp of hazards in the supply chain will increase freight spend and diminish the brand value. However, having an idea about the supply chain risk that companies endure in the global market will help reduce their impact. This will also enable shippers to mitigate the likelihood of occurrence and minimize disruptions simultaneously.
Unfavorable weather conditions
Extreme weather is a significant supply chain risk to ocean freight activities. Tropical storms can prove disastrous for ocean carriers. The recent reports on the global climate change indicate tropical storm threat is on the rise. One of the ways in which shippers can avoid such supply chain risk is through re-evaluating ocean route used and determining which carriers can increase shipping in anticipation of tropical storms.
In the age of modern trade, supply chain risk exists within the connectivity of systems. The integration and modification of systems increase the risk even though systems can be integrated through an open-source software. Furthermore, poorly integrated systems could lead to bottlenecks and disruptions in the supply chain. To stay prepared for such contingencies, companies must create a backup data resource and decentralize the data storage. It is also vital to ensure that the system connectivity is on a secure network. Furthermore, companies must give emphasis to avoid unnecessary modifications, and work with expert supply chain systems’ integrators in order to maximize profitability and efficiency.
Efficient supply chain management is the key to boost a company’s revenue and stay competitive in the marketplace. To achieve this, companies must be hyper-focused on reducing waste to generate cost savings and minimize the risk in supply chain management. Furthermore, the rising customer demand calls for better service and availability of right products at the right time so that companies don’t lose their valuable customers to competitors. Here are the five key tips for companies to boost their supply chain management:
Tips to boost your supply chain management
Partner with current suppliers
Often, companies tend to face market wide challenges in supply chain management. Developing an effective solution for this kind of scale might be a difficult task for a single partner within the value chain. Hence, it becomes necessary to develop deeper partnerships with your suppliers to help grow each of your businesses. Creating a mutually beneficial strategy can be tricky, but with the right planning and strategies in place, it is easily attainable. Here enterprises must lay the focus on clearly defined, revenue sharing-based, and easily trackable KPIs, and information transparency. Furthermore, they can also develop a coalition charter that outlines the arrangement in detail. In this manner, firms can tackle issues in supply chain management at a scale beyond their current capabilities.
Maximize IT investment
Today, the IT department is tasked with both supporting daily operations and expanding the business operations. It is important for modern businesses to invest in new technologies that can help employees perform tasks in a much-simplified manner and in turn boost the company’s supply chain management.
Comprehensive training of the workforce
A training program should be aimed at teaching the workforce more than what the daily tasks that they are expected to perform. It is vital for companies to share their comprehensive plan to the employees in order to increase productivity while reducing costs. The workforce must be trained on the importance of internal and external customer service. It is also important to incentivize them to act in accordance with your business’ vision, mission, and values. Sharing this and training will drive a successful organization by creating aligned goals while improving supply chain productivity.
Improve information sharing and visibility
Transparency is an essential ingredient to determine the efficiency of operation in supply chain management. Furthermore, it is high time that companies eliminate slow, unreliable spreadsheets to provide information. Rather they must share up-to-date information through current technology solutions. Other ways to increase information sharing include taking advantage of big data analytics, measuring supply chain metrics regularly, and also involving employees in identifying inefficiencies in the system. By keeping the workforce and the clients informed, companies can create opportunities for innovation.
Analyze customer trends and opportunities
Supply chain managers must keep a constant watch on the trends and opportunities in the market. This will not only help them be in line with the newest market opportunities but will also consequently improve the overall supply chain management and its efficiency by adopting innovative techniques to cater to customer demand.
Gain more insights on how to revamp your supply chain management to suit the changing trends in the market
Global supply chain management has evolved drastically over the years. Technology and innovations are the major contributors in fueling the efficiency and flexibility of supply chain processes across various industries. However, in this era of digitized and globalized business, keeping up with the speed of changes has become more difficult than ever before. As the landscape evolves, supply chains must evolve in order to adapt to stay ahead of the curve. A company’s ability to manage complexity will greatly define how well they can compete and succeed.
Although the importance of supply chain management is quite evident for modern economies, there are several myths and misconceptions that plague the practice. Let’s examine some of the most persistent and stubborn supply chain management myths and carry out a reality check for each of them:
Myth #1: Supply chain management is all about purchasing
Associating the supply chain management process with only purchasing functions is clearly an outdated outlook that ignores the strategic role that SCM plays for modern digital enterprises. Rather, the supply chain must involve greater flexibility, enhanced strategic awareness, and stronger entrepreneurial thinking. Today’s supply chain professionals are also looking at mastering several other key functions that impact SCM, including customer experience, systems thinking, and innovation.
Myth #2: Investing in SCM applications will generate rapid returns
Pragmatic application of supply chain management products in real-world business problems will undoubtedly deliver good returns. However, poorly specified implementation and investment in SCM can result in a cycle of continued investments to support unrealized but promised benefits. Companies must exercise focus on delivery, quality, and time targets. Effective and detailed planning is an essential element of an effective global supply chain management process.
Myth #3: Right forecasting can eliminate supply chain issues
Considering forecast accuracy as the sole cause of issues is dangerous and stems from two main misconceptions. Firstly, forecast accuracy should not be considered as an end in itself. Instead, it is one contributor to outcomes of the supply chain process that needs to be managed to deliver the desired results. Secondly, despite all the best attempts, forecasts in most cases will not be completely correct. It’s much more important for enterprises to recognize this fact and manage an understood level of risk than to spend too much effort in improving forecasting when it may not translate to better outcomes.
Myth #4: Lesser inventories are always better
Controlling costs might be the major agenda for most supply chain managers. Consequently, they try to keep the inventory as low as possible. But on the flip side, this could greatly increase their financial risk. While it’s true that holding a high level of inventory ties up business funds that could rather be used in other areas. However, it is also important to remember that high inventory isn’t always a bad thing — and often proves to be a good sign of growth ahead. For instance, it is remarkable if an organization increases inventories because it is confident about the economy and forecasts higher demand. Furthermore, when comparing the extremes of a stockout versus and holding more inventory than you need, the former is definitely worse. When demand cannot be fulfilled, customers will be disappointed and the risk of alienating them and losing them to competitors are higher.
Gain more insights into how our solutions can enhance your supply chain management process
What is supply chain risk management?
Supply chain risk management refers to the process of undertaking strategic steps to identify, assess, and mitigate risks in the company’s end-to-end supply chain. As businesses both small and large seek to extend their global reach, risk management in the supply chain is increasingly becoming crucial. Businesses that enter into new markets often need to form new supplier relationships, engage with state-owned entities, and adapt to local laws and culture. This results in supply chain complexity that can result in a wide range of financial, regulatory, and legal risks. Supply chain risk management strategies help enterprises to foresee potential issues and adapt to the risks and supply chain disruptions as quickly and efficiently as possible.
Supply chain risk management techniques
Innovation and efficiency in contracting management
One of the emerging trends in supply chain risk management is contract streamlining. It involves having a better understanding of the costs involved in creating and negotiating old-style “legalese” contracts. Many of these are unnecessarily written in legal prose, lengthy, difficult to understand, one-sided protections. But newer styles of contract design and wording enable procurement teams to have a dramatically-higher success rate of executing well-drafted agreements. Procurement contract portfolios are a great example of how legal risks can outweigh business balance, extending the contracting cycle time and procurement efficiency. Instead, several legal and procurement groups find it better to rely on concise and well-balanced contract documents that result in easier acceptance by suppliers.
Better understanding of potential suppliers
It is important for businesses, especially in the global scenario to have a clear understanding of the third-party supplier’s business practices. This involves answering critical questions such as – Does the supplier have a strong track record for meeting contractual obligations? Are there any conflicts of interest in existing business relationships? Do the suppliers observe the same high standards as your company with respect to providing safe working conditions and protecting the environment? It must be ensured that the supplier meets all the pre-requisites of the business before onboarding a new supplier.
Supply chain risk management awareness and training
Supply chain risk management strategies cannot be successful unless significant attention is given to training personnel on supply chain policy, procedures and applicable management, operational and technical controls, and practice. Building an awareness training program provides guidelines for establishing and maintaining a comprehensive awareness and training program.
Resolve or prevent disputes effectively
Disputes are inevitable elements in different stages of the supply chain. One of the key steps in mitigating dispute-related risks and promoting smooth operations is to proactively prevent disputes from occurring or resolving them amicably in case of occurrence. The right processes and technologies are crucial in identifying sources ofdisagreement that can cause disruption in the supply chain. It is important to employ people with the right communications skills and the ability to not affect the ongoing supply of materials. A mutually beneficial resolution is often the best way to maintain a relationship that not only mitigates risk but also enhances value for the company.
Gain more insights into developing the right supply chain risk management strategies for your business
Every supply chain management process involves designing, planning, executing, controlling, and monitoring of supply chain activities. It helps in building a competitive infrastructure, creating net value, supporting worldwide logistics, bringing demand and supply in synchronization, and measuring performance globally. The supply chain manufacturing process is said to the unsung hero of the manufacturing sector and it is the foundation that acts a support system for every manufacturing business.
Importance of Supply Chain Management
Every supply chain management process plays a crucial role in running key operations for almost every organization. If the supply chains management process doesn’t run smoothly, the supply chain system can halt at the floor and ultimately lead to a loss in production. The importance of every supply chain management process lies in the fact that it helps in boosting customer service, reducing operational costs, and improving the financial position of an organization. The supply chain management process also has societal roles like ensuring human survival through healthcare and energy supply chain, improving quality of life, and protecting cultural freedom and development. But then, the most important question arises, which is, how can we achieve a successful supply chain management process? Here are the five most essential steps for effective supply chain management.
Steps for a Successful Supply Chain Management Process
The first step in every supply chain management process is planning. To come up with the best possible way to fulfill the end requirement is the first strategic aim of the process. There is a list of key components like warehouse designing, plant location and its size, delivery models and many more which need to be identified. Additionally, transportation cost modeling and warehouse efficiency models are the other components that need to be developed and without which the supply chain management process would be incomplete.
For years, outdoor gear distributors are trying to maintain a delicate balance of fulfilling expectations without having product overages and losing potential profit in fire sales. To gain improved control, outdoor gear market players need an enterprise-level view of inventory that the flexibility of the cloud can enable with ease. Additionally, with integrated operations, inventory, and financials, businesses can easily view demand history of the products to balance customer expectations with actual demand, drilling down to even the material level to ensure accurate lead times, cost estimates, and stock to streamline inventory management and enable more effective logistics.
Moreover, in today’s competitive environment, maintaining business and growth in standard channels is no longer enough. It’s important for outdoor gear market players to create relationships with their customers, mindful of the unique place these products hold in the hearts and minds.
- The client: A leading outdoor gear market player
- Size: >$70 billion in revenue
- Area of Engagement: Supply chain optimization
The client – an American multinational corporation that is involved in designing, developing, manufacturing, and sales of outdoor gear, apparel, footwear, and accessories. The company is headquartered in Oregon, U.S. It is the world’s largest supplier of outdoor gear, with revenue more than US$34 billion in 2017. The client player was facing fierce competition in the outdoor gear market and the threat of vertical integration from peer manufacturers was putting pressure on the company’s supply chain. The challenges identified by the client were related to their supply and demand. These issues aggravated by the company’s growth and capacity constraints – and they lead to a loss of sales and excess inventory totaling US$ 5.2 million.
How Can Supply Chain Optimization Help Outdoor Gear Market Players?
With effective supply chain optimization in place – which includes strategies and best practices for coordinating and integrating all the functions, transactions, activities, and people in the entire value chain – companies will be able to address and adapt to ever-increasing complexities. Supply chain optimization also allows organizations to streamline their processes to ease the flow of people and the products created. Moreover, supply chain optimization aids in logistics, transport, and regulatory compliance which consequently plays an instrumental role in decreasing liabilities, reducing hold-ups, and mitigating vulnerabilities at large.
Summary of our supply chain optimization solution
SpendEdge’s supply chain optimization specialists tailored a research approach which included primary and secondary research methodology coupled with qualitative and quantitative data collection procedures to help the client overcome their predicaments. The specialists also congregated information from various proprietary sources to help the outdoor gear market player gain more visibility into their sourcing and procurement processes and identify the major areas of spend.
Solution Benefits and Business Impact
With the help of SpendEdge’s supply chain optimization engagement, the outdoor gear market player carried out a thorough analysis of their supply chain and increased focus on terms of sale, order quantity, and consolidation at the origin. The client also halved order quantity, increased order frequency, and reduced inventory levels with the help of this engagement. This further helped the client achieve a saving of US$ 13 million.
Future of Outdoor Gear
Terms like urban outdoor, athleisure, and lifestyle and sustainable fashion have dominated the outdoor gear market. This means that the image of customers and the relation between customer and brand has also transformed. Additionally, sustainability and responsibly produced outdoor gear are becoming more and more important for customers today. As a result, companies in the outdoor gear market must take the necessary steps to improve customer satisfaction and achieve a competitive advantage.
A must-read case study for procurement specialists and decision makers looking to develop an understanding of the outdoor gear market
The client wanted to leverage supply chain management solutions to enhance sourcing strategies across their supply network. To proactively address the challenges emerging due to their inefficiency in managing their supply network, the leading export import business client operating in the middle eastern market approached SpendEdge to devise an all-inclusive approach to supply chain management throughout their global supply network.
About the Client:
A leading export import business firm in the middle eastern market, worth approximately 11 billion U.S. dollars. The client is a prominent player in the export import business industry with multiple branches across various geographies.
The export import business client was facing difficulties in enhancing their supply chain capabilities. To help the client overcome their challenges, the experts at SpendEdge developed a three-step methodology to tactically address the burgeoning nature of an inefficient supply chain system.
How did SpendEdge Help the Client:
- Step 1: Identification and development of a suitable plan
The initial step dealt with the development of a suitable plan. The ‘planning phase’ is the strategic part of any SCM process. Effective planning helps develop the blueprint to fulfill the necessary end requirements. It also deals with the identification of key aspects of the supply chain, including the warehouse design, delivery models, plant size, plant location, and other similar aspects.
It is essential to emphasize on the development of enhanced sourcing strategies as it enables organizations to identify the reliable suppliers of raw materials that need to be procured. This is a crucial step in the development phase of an effective supply chain management system, as it helps ensure that the production process would never jeopardize.
- Step 3: Execution of the devised supply chain framework
The final phase deals with the implementation of the developed process in order to give shape to the designed plan. The final outcome of this stage was further quantified to ensure maximum efficiency. Also, the solutions were developed in a manner such that it enables the client to enhance efficiency at the execution stage of the supply chain management process.
Key questions answered in this supply chain management study include:
Benefits of the Engagement:
Our experts helped the export import business client develop an effective framework to curtail the risk of a catastrophic supply chain failure due to an ineffective supply chain management system. Redesigning the entire supply chain system enabled the export import business client to enhance supply chain visibility by maximizing the efficiency of the final outcome.
Also, the development of a holistic approach accounted for major changes across the organization’s supply network including – supply chain functions, supply chain data management, and data governance. This, in turn, helped the export import business firm tackle various supply chain challenges to drive efficiency.
Why is supply chain management necessary?
Supply chain management is a crucial process for any industrial organization, as it holds great significance in establishing key supply chain operations. An inefficient supply chain strategy halts processes at the initial stage, which ultimately lowers efficiency of the final outcome.
Moreover, supply chain management systems have undergone a journey of their own for several decades – from the basic system to the more sophisticated algorithm-based ones. Also, owing to the dynamic nature of supply market trends, supply chain management has become an essential function across industries. Factors such as these have compelled organizations to focus on enhancing the cost-effectiveness and efficiency of supply chain operations by implementing a robust supply chain management system.
While leading export import business establishments often turn to supply chain management solutions to enhance the efficiency of supply chain operations, they quickly realize that a precise supply chain management framework ultimately relies on the consistency and quality of the underlying supply chain data. This case study on the export import business concludes that a flexible supply chain management system forms the foundation for developing and implementing effective supply chain strategies.