It was true before COVID turned the economy upside down and it will be true after the pandemic is over; the mining sector is in a period of transformation. Mid-market miners are challenged with finding new ways of doing business that run the gamut of their operations and adding procurement transformation is a critical piece of the overall strategy.
Intelligent procurement is labour intensive on the front end. Collecting data from a purchaser’s portfolio often means piecing together SKUs, wrangling one-off suppliers not on contract, and weaving together contracts from various spreadsheets and reporting tools that do not quite paint a whole picture. This loose-net approach to procurement has an inherent cost. It is susceptible to increased processing costs, longer order cycle timing, over-purchasing, stock-outs and general supply chain disruption. One of the early lessons of COVID has been to shore up such gaps and intelligent procurement is the start.
The investment made in intelligent procurement pays off big for a mid-market miner in two ways; (1) it protects against disruption in the supply chain and (2) lowers the overall cost of procurement spend.
First, let’s address disruption in the supply chain. A host of things can go wrong in the supply chain and many have been highlighted through the pandemic. When the supply market suffers from scarcity suppliers may struggle to meet all their commitments. Mid-markets miners purchasing alone, against the backdrop of larger volume miners purchasing in the region, may find themselves without the allocation and supplies they thought they had.
Working with a Group Purchasing Organization (GPO) helps protect against this. A GPO has a unique perspective, a bird’s eye view of market conditions in a region, and pools this spend to make the supplier market take notice. Understanding that knowledge is power, GPOs have the ability harness all the demand stemming from a region and transform the individual purchasing requirements of each into a large-scale supply chain magnet that suppliers are eager to interact with. When purchasing volume is pooled, suppliers are highly motivated to meet the needs of group members.
Just as important as security of supply is procurement cost, and delivering improved pricing is the bread and butter of a GPO. The competitive pricing GPOs deliver is rooted in two premises. The first is the benefit of volume buying – more volume drives prices down by giving suppliers large and predictable volumes. The other is access to mining industry experts who spend 24/7 thinking about procurement, staying on top of commodity prices and industry developments, working on should-cost models and negotiating intelligence informed contracts.
Procurement transformation offers mid-market miners a proactive course forward to protect against disruptions while spending less. Mid-market miners that work with a GPO gain a partner to help turn raw data into opportunities, give access to the benefits of large volume purchasing, and bring onboard a team of experts that offer the best procurement contracts in a one-stop shop.