Hi Top Tips for Measuring Procurement’s Contribution to the Bottom Line:

Hi Top Tips for Measuring Procurement’s 

Contribution to the Bottom Line:

Numerous procurement professionals in the mining industry in order to understand the challenges faced on a daily basis, but also to get insights into what teams across Australia are doing in order to overcome those challenges. 

2015 is due to be a better year for most resources in terms of prices, but the companies who move ahead in that market will be those who are aggressive with their procurement practices in the back half of 2014.

We’ve researched with and heard from companies such as Vale Australia, Oz Minerals, Thiess, Rio Tinto, Alcoa, Hatch, Fortescue Metals Group, Orica and many, many more over the last 12 months in order to bring you this series of articles providing insights on what your peers are doing right now across 3 business and department-critical areas:

1. Cost Optimization.
2. Staff management and up-skilling.
3. Measuring (and delivering) procurement’s contribution to the company bottom line.

Part Two: Measuring Procurement’s Contribution to the 

Bottom Line

With procurement scrutinising spend by other departments it’s only natural that there is an increased focus on demonstrating the value the function delivers to the wider business and the bottom line. However, departmental savings are often credited to those functions rather than procurement, so how else can you ensure your procurement team are not under-valued and under-appreciated in the wider organisation?

Luiz Sapucaia, Procurement Manager, Vale Australia:

We have implemented KPIs to measure efficiency and improvements in the procurement area. In my opinion, the KPIs have to be aligned with operations requirements and client satisfaction is key for the success of procurement functions.

Jeff Bowman, Manager, Category Management Group,Thiess

Very simply: undiscounted spend on contract X savings factor = savings benefit. We report this monthly. We also measure sourcing share across all categories under management as well as have goals on % of addressable spend under management, however, these only indirectly impact the bottom line whereas the savings benefit is direct.

Richard Morgan, Principal, Aspec Engineering:

Reduction in cost due to intelligent use of competition between suppliers.

Andrew Edgecomb, Contracts Officer, OZ Minerals

Recording all cost savings achieved with each contractor/supplier and reporting this as part of my department’s KPIs to operational and senior management.

Lauro Azambuja, Principal Advisor, Procurement, CQUniversity Australia:

By defining the right modus operandi and the ideal point of cost (of the procurement team) versus benefit (cost/savings of the deliverables). This is a tuning process and each organization has its own point. It includes:

1. Transition the buying process from an isolated and transitory transaction to a sustainable and participative planned process, which includes procurement team , buyers (or budget stakeholders) and finance sharing equivalent responsibilities. In particular, by moving the buyers (or budget stakeholders) from the “audience” to the “stage”.
2. Operational excellence by all involved.
3. Mitigate legal and financial risk (contracts and strategies).
4. Identify opportunities to reduce costs and expedite the process.

Hi Mining Top Tips Double!! WHAMMY!

Hi Mining Top Tips Double!! WHAMMY! 

Hi Six Tips for Business Improvement in Mining:

Throughout the years, the concept of ‘business improvement’ has evolved from a cost-savings initiative to a process that has driven efficiency and raised productivity across numerous industries. 

From companies like Toyota to Rio Tinto, it has been tweaked and adapted for any imaginable scenario and there’s a big markets out there seeking business improvement advice.

 

Business improvement can be a timely and costly process, but it can yield great dividends. 

To ensure your organisation will benefit from it, here are some simple steps for those in mining who are considering business improvement.

 

Needless to say, these tips won't be applicable to all mining companies, so pick and choose the appropriate ones & leave a comment on what other tips you have.

1. Examine your culture(s);

At the heart of any business improvement initiative is change management. 

Whether it’s new machines for steel workers or implementing an offshore payroll system, culture is at the core of what businesses do, and to change this requires great effort. 

To make it easier for you and your teams down the track, it’s important to examine the corporate culture.

 

It is critical to understand who will be affected by corporate changes and consider how to communicate the vision of change to relevant parties. 

Of course, different parties will have different views on how to adopt change and improve processes.

 

Also, notice we said cultures, not culture. 

One frustration for many business improvement projects in mining is that because mine sites are so remote, employee culture varies from each mine site, so it’s worthwhile to spend time upfront to understand each of them and draw up a plan of attack specific to the site.

  

2. Communicate, communicate, communicate;

Too much has been written about communication and its role in business improvement, so we won't go on. 

Whether it’s communication between the Business Improvements department and the rest of the organisation, or board-level members to employees, communication is a fundamental part of business improvement that should be both transparent and clear.

 

3. Accurate Planning;

 

Whether it’s meeting production targets or reducing carbon emissions, accurate and realistic planning can be difficult in mining.

 

As Ivan Woolridge, Principal Business Excellence Advisor at Newcrest Mining observes, 

- “There remains a culture in mining where human effort and ingenuity are pitting against the randomness of nature”.

 

There will always be unforeseen circumstances when working with nature, and sometimes ‘nature’ can be used as excuse when teams fail to meet production targets.

Whether or not this is an adequate reason depends on the organisation.  

In mining, targets are perceived as guidelines instead of fixed goals, leading to missed targets, delayed timelines and waste.

4. Have a clear vision;

Effective business improvement involves cross-departmental teamwork and a clear vision from leaders who are driving the change.

 

When Rio Tinto used business improvement principles in its iron ore division in 2008, chief executive Sam Walsh said:

 

“This is very fundamental in the way that we structure our work… it’s not the senior management that implement the sort of significant improvement on the ground - it’s actually every single person working within Rio Tinto Iron ore and working within Rio Tinto.”

 

In this light, Integrated Project Delivery (IPD) should be a top priority in a business improvement plan. 

By assembling as many of the project participants as practical in the very beginning of the project, it ensures all parties have a clear vision of the end goal in sight.

5. Don't lose focus;

Continuing from the above point, in day-to-day operations, it’s easy to forget that business improvement is ultimately a long term goal. 

When changes happen and budgets blowout, it can distract from overarching goals. 

In such situations, the appropriate action may be to take a step back and analyse how it will affect the overall project.

 

As David Long, formerly of Sutter Health Group notes, “Efforts to manage and improve performance are aimed at improving total project performance… it is more important than reducing the cost or increasing the speed of any one activity”.

 

6. Seek external advice;

Whilst a costly option, seeking third party advice from consultants and business improvement experts may prove worthwhile. 

Not only do they have a plethora of experience under their belts, but it’s likely they may have worked on mining projects similar to yours. 

It’s common sense to shop around to see what work an external provider has done and what feedback they've received to make sure they're a reliable source of advice.

*- "Do you have any other tips for business improvement for mining projects? Share them below in the comments section".

Want To Know & Learn More About This Topic? Download The Event "Mining Procurement and Supply 2014"

 

Brochure "Click Here".

Hi 5 Top Tips for Performance Managing Your Suppliers to Success:

A big focus that keeps coming up time and time again is that of supplier performance management and getting back to basics with what you expect from your vendors in the mining industry. 

Based on research with over 100 procurement and supply chain executives in the mining sector from companies such as Rio Tinto, MMG, BHP Billiton, Fortescue Metals, Thiess, St. Barbara, Orica Mining Services and many more, here are top tips for improving the results from your suppliers:

1.       Review all SLAs and contracts in place to identify core KPIs – many long-standing vendor relationships will be based on contracts that have been in place for years, or even decades sometimes. 

They are often drafted by people who have now left the company, so it’s important to conduct regular reviews of all SLAs and contracts to understand what agreement is in place on both sides, and to ensure the terms are still beneficial in changed market environments. 

If the terms are no longer relevant or suitable, then it’s time for a change! If they are, ensure they're actually being adhered to, measured and rewarded when achieved.

There’s no point in having great, structured KPIs if they're not then measured and acknowledged.

2.       Where applicable, using end to end category management to derive more value from your supplier expenditure – utilising market experts to drive ongoing savings without an “end point” in sight, can help extract significantly more from your suppliers. 

The sustainable results it can deliver actually go beyond simple cost savings, and can extend into additional value, opportunities and upgrades for organisations. 

E2E category management can also be used to better design the supply model and improve inventory management.

3.       Shortlisting vendors across all services and categories – having a permanent short list that you can review on an annual, or less frequent basis, can reduce a lot of wastage time for more transactional purchases. 

A clear list of requirements helps whittle down the applicants quickly, and safety standards should be top of this list in the majority of categories.

4.       Understanding your suppliers’ delivery cycles and inventory to minimise stockpiles and revenue sunk in assets – whilst the temptation is often to have excess inventory and equipment on site (rather have too much than risk too little and have production ground to a halt), this can end up in vast amounts of money sitting around in the form of assets. 

That revenue is very valuable to the GM of a Mine if it can be freed up.

5.       Involve your suppliers early in any system or project overhauls – bringing suppliers to the table early when there are any significant changes to your company workings is usually beneficial for all parties. 

As with any stakeholders, early involvement usually means more engagement in any changes. 

Bringing long-standing suppliers in early can also help with their expertise and ability to identify any problems or opportunities with system or project shifts.

* - "If you've got any top tips, let us know so we can share with our members!."

Hi 5 Top Tips for Performance Managing Your Suppliers to Success.!. & Strategic Sourcing.!.

Hi 5 Top Tips for Performance Managing Your Suppliers to Success.!.

Procurement and contracts professionals in the mining industry, between interviews, surveys and annual Mine Procurement and Supply conference, a big focus that keeps coming up time and time again is that of supplier performance management and getting back to basics with what you expect from your vendors in the mining industry. 

Based on research with over 100 procurement and supply chain executives in the mining sector from companies such as Rio Tinto, MMG, BHP Billiton, Fortescue Metals, Thiess, St. Barbara, Orica Mining Services and many more, here are top tips for improving the results from your suppliers:

1.       Review all SLAs and contracts in place to identify core KPIs – many long-standing vendor relationships will be based on contracts that have been in place for years, or even decades sometimes. 

They are often drafted by people who have now left the company, so it’s important to conduct regular reviews of all SLAs and contracts to understand what agreement is in place on both sides, and to ensure the terms are still beneficial in changed market environments. 

If the terms are no longer relevant or suitable, then it’s time for a change! If they are, ensure they’re actually being adhered to, measured and rewarded when achieved.

There’s no point in having great, structured KPIs if they're not then measured and acknowledged.

2.       Where applicable, using end to end category management to derive more value from your supplier expenditure – utilising market experts to drive ongoing savings without an “end point” in sight, can help extract significantly more from your suppliers.

The sustainable results it can deliver actually go beyond simple cost savings, and can extend into additional value, opportunities and upgrades for organisations. 

E2E category management can also be used to better design the supply model and improve inventory management.

3.       Shortlisting vendors across all services and categories – having a permanent short list that you can review on an annual, or less frequent basis, can reduce a lot of wastage time for more transactional purchases. 

A clear list of requirements helps whittle down the applicants quickly, and safety standards should be top of this list in the majority of categories.

4.       Understanding your suppliers’ delivery cycles and inventory to minimise stockpiles and revenue sunk in assets – whilst the temptation is often to have excess inventory and equipment on site (rather have too much than risk too little and have production ground to a halt), this can end up in vast amounts of money sitting around in the form of assets. 

That revenue is very valuable to the GM of a Mine if it can be freed up.

5.       Involve your suppliers early in any system or project overhauls – bringing suppliers to the table early when there are any significant changes to your company workings is usually beneficial for all parties. 

As with any stakeholders, early involvement usually means more engagement in any changes. 

Bringing long-standing suppliers in early can also help with their expertise and ability to identify any problems or opportunities with system or project shifts.

Click Here To Download The .PDF Document For Mining Procurement & Supply APAC 2014.! Or View & Download Below.

Mining Procurement & Supply APAC 2014.!.

Hi Mining Extra Feature!

Hi Strategic Sourcing in Mining – What Skills and Characteristics Should Your Strategic Sourcing Expert Possess?

Strategic sourcing and end-to-end category management have both increased in popularity significantly over the last 6 – 18 months in the mining sector, due to the current pressures being place on procurement departments by the state of the industry.

Whilst historically procurement has been a financial qualifications driven department however, many are finding that some of the best category managers and strategic sourcing experts come from an operational background.

So what really makes the ideal candidate for a strategic sourcing role? We've got the views of many experienced procurement managers across the mining sector and compiled their input into a top skills and characteristics list:

1.       A hands-on understanding of the product/category they are responsible for. This doesn't have to directly come from working in an operational job at the coal face, but if their background is purely financial they should strive to work closely with operations, or the relevant department, to understand less tangible implications of purchasing decisions they will be making for that category. This can include aspects such as product quality, life cycle cost, customer service quality of the providers in the market, integration issues, or staff knowledge of different systems/products.

2.      They should have strong analytical skills and an ability to translate data into commercially applicable strategies for purchasing within their remit. 

This can stem from a deep market insight and knowledge, but it can also be an inherent trait that will only sharpen with an increased knowledge of the sector, players and products.

3.       Their ability to negotiate, influence and engage with suppliers should be advanced. 

The person can have the best product and market knowledge possible, but if they are not able to use this to influence results with suppliers (in terms of contract, cost, support etc. ), then it is rendered fairly useless. Finding someone who can be strong in both analytical and interpersonal skills can often be a challenge, so understanding which is more important for the particular category can be the critical difference.

4.       Intertwined with this, they should also be able to apply these skills internally, within the business, to get buy in and work closely with the key departments they will be engaging with. 

Being trusted by other departments to make the right purchasing decisions is incredibly important, and obviously this trust can be built quicker by people with the ability to approach, listen to and collaborate with other functions. 

This can also be achieved better by those with intrinsic leadership qualities, but that’s not mandatory. An ability to inspire is more useful here.

5.       For a contracting firm, rather than a mining company, position(e.g. an OEM, or a major contractor, or EPCM), an understanding of the client’s requirements and expectations is another important factor to be taken into consideration. 

This will obviously come partly from the client’s briefing, but an ongoing collaboration between the strategic sourcing executive and the client will ensure a higher level of client satisfaction throughout and at the end of the contract.

Hi VOD Systems.! Hi Building a Ventilation on Demand system? 4 things you need to know!.

Hi Building a Ventilation on Demand system? 4 things you need to know!.

Ventilation on Demand (VOD) is a whole-of-mine ventilation system, which is enhanced by coordinating the ventilation equipment settings for the needs of the mine on a real-time basis.

Ahead of Hard Rock Mine Ventilation 2014, Allison Golsby, CEO of ConsultMine discusses the impact of VOD systems and how they are offering new opportunities to reduce operational costs, improve efficiency and health & safety.

View & Read Furthur More Below; Click Here To Download Scope Of Information Document as below;

Visit Hi Wise Products Blog To View Our HARD ROCK MINE VENTILATION 2014 Publication Post & View Or Download The Event Agenda & Explore More Related Information By Clicking The Post Link Here.

Visit Hi Wise Products Blog & Other Related Hi E Community Blogs For More Mining Industry Ventilation Posts Of Useful Links, Information & Downloads, Click Here. To Visit Hi E Community Blog Click Here & View Table Of Blogger Contents For All Blogs Published & The  Blog Accessible Links. 

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