Monday 3 March 2014
Almaty Office, Kazakhstan
As discussed in earlier 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.
Previous blogs addressed:
- Setting-up an operational supply chain: management controls
- Corporate structure in relation to supply chain
The full presentation covering setting up a mine can be seen on YouTube at:
This blog discusses The Foundations for an Operating Supply System
In an earlier blog, coordination between supply and finance was discussed. Computer software for finance and management will have been selected and an essential prerequisite requires interfacing data between supply and finance. This includes transactional (dynamic) and informative data.
Transactional data includes all of the inputs on a regular basis. Materials issues, procurement activity, receipts and stock movements (transfers, adjustments etc.).
Informative data refers to both constantly accessible reports, such as inventory held (stock-on-hand), and to periodic reports concerning stock movement, outstanding purchasing commitments etc.
The framework for all of this data will by necessity be completed before a mine ‘goes-live’ operationally. Much of the IT process aspects will be undertaken by internal IT personnel in coordination with specialists from the software supplier, and it is essential that supply management is deeply involved too especially at the time that parameters are set. Supply and Finance will work together on setting parameters. Too often, parameters are set that do not consider all supply/finance eventualities and are difficult or impossible to change later.
It is advisable that supply team has dedicated resources at this stage, preferably from permanent staff. This additionally benefits familiarity and training.
Held inventory will be in millions of dollars and therefore careful attention in establishing correct selection of inventory to be held is crucial. On one hand, end users will want as much as possible to ensure that they have no supply problems during operations and on the other finance will want to ensure that no more than is essential is held in inventory. This is a fine balance: on one side too little will jeopardise production; too much will adversely affect the financial position.
Therefore it is necessary to establish a solid cataloguing procedure for all items held in inventory. This requires a formal approved request for stock to be held (often called ANSI) and must be carefully reviewed and approved by end-users, finance management and supply team.
It is important for replenishment processes that anticipated consumption is accurately determined to allow initial ordering and replenishment procedures to function effectively. Dedicated inventory control personnel are required at an early stage and ongoing. End users tend to overestimate and it is therefore prudent to minimise initial orders and allow subsequent replenishment techniques to correct any under-supply situations. The alternative is over-stocking, increased costs, over-inflated asset balances and shortage pf storage space, a common situation.
The aim of Inventory control procedures is to replenish in the right quantity at the right time. To ensure this a suitable inventory replenishment management procedure is a must. This can only be accomplished if a meaningful stock database is built.
Many ERP software solutions do not provide the depth of inventory management process to suit the needs of mining companies, especially in remote locations. Alternative/additional solutions are usually required.
CBC is able to facilitate this crucial area during the development of efficient mining supply operations.