How can mining supply chain professionals devote more time to strategic planning and supplier relationships?
Mining procurement often involves a race against time to get hold of urgently-needed parts. Despite centralized supply functions, standardized equipment, preferred supplier lists and purchase categorization, sourcing often remains reactive rather than strategic.
Enforcing the procure-to-pay process
By automating procure-to-pay, mining companies can enjoy considerable savings, with faster transactions, invoice generation and processing, enabling payments to be settled quicker, improving working capital. However, much can go wrong if either party fails to capture data correctly, or misinterprets instructions.
Generating and protecting value
Much value is gained in the earlier and later stages of the procurement life cycle. Strategic sourcing for multiple categories, executed across the entire organization, can help to achieve genuine scale economies, by reducing the range of items purchased and utilizing global deals with suppliers.
Strict controls over master data
Data can be a huge, and often hidden obstacle, leading to incorrect purchases from non-preferred suppliers at higher costs in small volumes. If the wrong part is purchased, equipment may fail, and a recall of critical parts from a supplier could even lead to a costly shutdown. Not only do companies need to clean up their data, to ensure common names for parts; every employee must adhere to the standards, overseen by formal ‘data stewards’.
Rethinking supplier relationships
Mining is characterized by a very high interdependence between buyers and suppliers. Any supplier contract should aim to secure the right quantities, at the right prices for the entire life of the mine, with flexibility to increase or decrease orders according to fluctuating demand. This calls for closer, collaborative, strategic relationships with suppliers incentivized to meet quality and delivery goals, and encouraged to generate innovative ideas for efficiency and savings.
Opening up inventory management
Suppliers often hold extensive knowledge about the client’s overall demand patterns and stock levels, which supply chain staff can use to produce more reliable stock forecasts. Some mining firms give suppliers control over the mine’s inventory, such as holding consignment stock within the mine, but owned by the supplier. This avoids tying up working capital in inventory, speeds up delivery and gives the suppliers the option of selling excess stock elsewhere.
Do your supply chain professionals:
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.