How can the metals and mining industry streamline direct material procurement?
Direct material procurement is complicated, especially for the metals and mining industry. Mining companies often deal with fluctuating prices and intense competition in addition to being highly capital intensive. The involvement of multiple stakeholders as well as the presence of complex material specifications add to the challenge.
Managing supplier collaboration is further complicated due to inefficient collaboration and manual reconciliations. Both suppliers and buyers find themselves wasting precious hours interacting over emails, phone calls, and messages. Since most companies still work with siloed information in different processes across multiple systems, there is a lack of transparency. Manual status updates bring in errors and latency leading to incorrect decisions.
A global metal company involved in mining, exploration, smelting and metals recycling that we worked with is a great case in point. The company’s manual processes meant buyers were spending 15–20% of their time negotiating, setting prices, and answering queries on payments, schedules, invoices, shipments, etc. taking time away from exploring new suppliers and opportunities. Manual processes also delayed service requests, order requests, invoicing, shipments, and settlements.
Their suppliers used email for all operational activities such as providing contract details, GMR summaries, GMR details, assay details, and payment and invoice information. So, the company had to deal with data from 200,000 emails from business partners each year, often with errors. Assay exchange was managed manually too. The entire system was inefficient, time consuming and error prone.
Unfortunately, this is a fairly typical scenario where sourcing materials in concerned in the metals and mining industry.
Finding an intelligent solution
Addressing the challenges of managing a complex purchase process such as sourcing of direct materials for metals and mining industries requires a digital transformation of the sourcing and procurement process. An intelligent cloud-based e-sourcing solution can drastically simplify supplier collaboration, optimize purchase orders, management of tolling agreements, and simplify the weighing and sampling processes. Some considerations while choosing a solution:
- Cloud-based and self service
Given that suppliers are generally geographically dispersed, a cloud-based platform enables suppliers to update data instantly from multiple locations using multiple devices in real time. Also, a simple and intuitive interface is key to enable a smooth supplier registration process and hassle-free data updation on a day-to-day basis.
- Tailored for industry and application
Given the complexities related to direct material procurement, the solution be tailored to needs of the industry. In the case of the metals and mining industry, for example, the ability to capture the components of concentrates as well as their quality and pricing methodologies is important. Similarly, the solution must account for weighing and sampling to determine the pricing based on the quality of the samples as compared of what contract. Assaying is another key process to incorporate — both identifying the components and impurities within the concentrates as well as third party validations in case of supplier-buyer disagreements.
- Ease of configuration and integration
The solution must allow for easy customization and configuration of new processes. Ease of integration with ERPs and open APIs to integrate with other systems like D365, Infor, NetSuite, EPICOR can help achieve truly seamless communication.
- Reporting capabilities for better visibility
Easily configurable dashboards for real time insights into processes and performance can be extremely valuable. Proactive reporting and analysis can enable deeper insights into the supplier performance and status of the contracts and shipments. Getting a 360-degree view of the purchase orders and the suppliers can offer powerful insights on supplier performance, ratings etc.
Digitalization brings apparent benefits
We’ve found that digitalization can typically bring savings of approximately 7.5% for the procurement department. By enabling suppliers to update information independently, transactional processing cost can reduce by up to 60%. Automation of accounts payables can reduce the team’s workload by as much as 30%. In addition, an intelligent solution can help optimize maverick spends, reducing spending by about 18%.
In the case of the global metal company that we referenced earlier, adopting an intelligent solution has enabled:
- Greater efficiency
By enabling real-time analysis, calculation and publishing of price information, the solution helps address some inherent inefficiencies that exist with large, complex pricing strategies.
- Autonomy for business partners
Business partners can update, upload or view documents and transaction histories (orders and balances). They can also conduct negotiations online, making it easier for them to do business with the company.
- Faster communication
Since automation of processes decreases time spent communicating with suppliers, it eliminates the latency of information sharing and speeds up the entire process.
- Ability to prioritize high value activities
Rather than chasing down information through multiple emails and phone calls, teams can focus on higher value activities such as evaluating new suppliers, better serving existing suppliers, and improving contracts.
- Real-time collaboration
Since the company and its suppliers have a single, shared view of information, including alerts and notifications when disruptions occur, inter-company interactions are simplified. They can negotiate in real time, working through contracts and pricing instantly instead of waiting hours or days for return phone calls or emails.
Sourcing and procuring direct material is intrinsically a complex process, especially in metals and mining, given the specific nuances of operating in these industries. An intelligent solution that can provide a 360-degree insights, connect data, and automate manual processes for a timely and unified view is valuable