Mining Supply Chain: Setting up a new mine: Corporate Structure

Wednesday 26 February 2014

Almaty Office, Kazakhstan

-6°C Sunny


As discussed in previous blogs, there are 4 main strategic supply chain stages during mine life:

1.      During mine development and construction

2.      At start-up

3.      During change management

4.      When performance fails to meet expectations.


We discussed the manpower resources in our last blog on 18 Feb.  In this blog we will discuss the next essential step in Supply Chain design for a new mine: the corporate structure as it relatesto supply.


A number of fundamental questions will be answered concerning supply chain at a very early stage, particularly at most mining companies that rely heavily upon strong and reliable lines of supply and with a strong awareness of the importance of holding inventory in appropriate amounts within the operating and financial guidelines of the company.


Firstly, lines of reporting are key and depending on the type of business, the complexity of the supply chain and the seniority of supply chain management, a decision for supply to report either directly to general management or through financial management.  Wherever possible, lines of reporting will be directly to management, although there may be a case for reporting through Finance.  If so, policy concerning stocking levels and expenditure budgets must be clearly established so that inventory replenishment and essential funding support do not starve operations.  Conversely, it is not recommended that supply department’s customers have responsible for supply to avoid over-ordering, overstocking and malpractice.


A decision will have been reached on financial computer software and will include the need for the capture of purchasing, inventory and stock movements data.  It is crucial that Finance and Supply Departments work together to ensure that processes are agreed, implemented, trained and monitored. 


Many ERP programs include Finance, Supply (Materials), Maintenance and HR modules.  Generally, Finance and Supply/Materials are always implemented; this is a fundamental requirement.  Maintenance may also be implemented (switched-on) and this may link with both Supply module for requisitioning and ordering and with Finance module for work order data reporting purposes (costing).  If HR module is implemented, labour costs may also be included in work order reporting.  However, if software policy is for separate finance and maintenance programs for example (i.e. not ERP), then supply data must always be linked to finance and not to maintenance or other programs.  This is because data required for financial reporting, inventory management and accounts payable processing must be linked otherwise an interface is required which is cumbersome and prone to errors.


All procedures must be supported by detailed manuals in relevant languages.


CBC is able to facilitate this crucial area during the development of efficient mining supply operations.



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