With the continuing fluctuations in the commodities markets and the downturn of the Australian resources sector, 2014 is likely to be a challenging year for the mining industry.
For mining executives wanting to maximise the return on capital invested in recent construction and expansion, it is now more critical than ever that they look to effectively optimize their supply chain systems to reduce costs, improve productivity and maximise margin.
In our experience, the benefits of optimising a demand driven supply network are becoming well understood across the mining sector, but a volatile mining market means that mining executives must now transform these benefits into genuine competitive advantage.
Success can be achieved when companies abandon the traditional approach to supply chain planning and consider a demand driven ‘value chain’ perspective – an optimised, highly sophisticated and completely integrated approach to their supply system from the in-situ resource to customer.
Unlike traditional supply and demand chain systems which abstract important details away and simplify the software representation of the business, a completely integrated system matches the configured supply chain model as closely as possible to the “real word”.
For example, one solution can manage mine planning to decide how to extract resources from the ground, the best timing for extraction, the interaction with processing operations and outbound logistics matched to fluctuating demand, price moves in the spot market and reduced rates for shipping.
This functionality not only increases the mining executive’s visibility of the wider impact of any decision made in the supply chain, but allows for more assumptions to be tested, and therefore greater strategic decisions to be made with confidence.
Integrated systems also allow mining executives to look at both upstream (procurement, inbound logistics) and downstream (outbound logistics, marketing and sales) processes in the supply and demand chain, which is vital if something changes and action needs to be taken quickly.
Roy Hill case study
In late 2013 Roy Hill Iron Ore (RHIO) had a clear goal to mitigate risk and maximize revenue through developing an optimized resource-to-market demand chain system.
At full capacity RHIO will mine almost 350 million tonnes per annum (Mtpa) of total material requiring 14 mining fleets to produce 55 MTPA of lump and fines iron ore product.
However the high throughput projection and linear nature of the RHIO demand chain (a single mine, process plant, rail track, car dumper and shiploader) operating out of a tidal and capacity constrained port means that reaching the capacity goal will be a constant challenge.
Using Schneider Electric’s StruxureWare Supply Chain Operation Advanced Planning & Scheduling (APS), RHIO developed a completely integrated, resource-to-market demand chain simulation system, and as a result the RHIO Demand Chain team are now able to clearly determine optimal ore extraction sequences that ensure product quality and tonnage targets are met in the most efficient manner while managing risk and uncertainty around asset capacity, maintenance strategies and unforeseen events such as weather.
The greenfields usage of an integrated solution forms the foundation for the same technology to be utilised through production ramp to steady state. The systems evolves as the asset evolves throughout its lifecycle.
RHIO is a world leading example of the application of an integrated operating systems philosophy, and demonstrates how a large operation can abandon the traditional segregated value chain ownership and processes and benefit from a completely integrated approach.
An integrated future
While mining companies across the globe will continue to face a challenging 2014, those that embrace a highly sophisticated and integrated approach to their demand driven supply network and consider sophisticated optimisation have the potential to increase the value, productivity and overall competitiveness of their mining operations, even in a volatile market.
[James Balzary is Global Sales Director, Supply and Demand Optimization Activity, Schneider Electric.]