With the COVID-19 pandemic outbreak catching multiple companies and entire industries off guard, it might be time for mining companies to re-assess their supply chain risks and build more resilience. Tara Hamid writes.
Supply chain disruptions of the magnitude created by the COVID-19 pandemic are causing the industry to re-assess its strengths and weaknesses to be better prepared for potential ripple effects.
To put into perspective the scale of supply chain disruptions, the World Economic Forum reported in May that week-on-week trade in China, the United States and Europe halved because of the crisis.
In the same month, data from Tradeshift, a global platform for supply chain management, indicated that trade had flatlined in every region affected by the lockdown.
The side effects of these lower global trade levels could particularly impact mining companies that rely heavily on inbound trade for their critical spares and equipment, according to Paul Mitchell, EY global mining and metals leader.
Addressing participants during a webcast on ‘How global mining and metals companies can lead through the COVID-19 crisis’ in April, the expert suggested that mining companies should act now to shore up existing supply chain structures, while considering how to build future resilience.
“Supply chains, both from an inbound and an outbound perspective, are something that everyone (who talks to us) is concerned about,” Mitchell explained during the webcast.
“These concerns seem to be more for the mid-term. When I talk to the clients, they say: at the moment we are okay. We have supply to do our operations, but our worry is that that would change in the future. They are worried about their critical spare running out and this impacting their operations.”
Mitchell’s advice to mining companies looking to build more resilient supply chains was to begin with an end-to-end supply chain risk assessment to prepare for global trade implications in their business.
“The first step is to review what is most critical to your operations. Find that single point of failure across the site that will really impact your operations,” he continues.
Mitchell also advised that mining companies identify their supply chain gaps and look at alternative options to supply their critical inbound products.
“Assessments of how much inventory will be required on-site should take into account anticipated disruption due to ongoing complexity around movement and transport. Considering alternative suppliers can ensure that a backup plan is in place,” he said.
While major Australian miners that own and control their own railway and port facilities will be better placed to manage visibility across their supply chains, there are a number of measures that smaller companies can adopt to mitigate the risks, according to Mitchell.
Steel Mains, an Australian manufacturer of mild steel pipe systems for water and wastewater transfer, is one supplier that knows first-hand about the risks that mines relying solely on foreign imports face.
“Apart from the lower quality products and increased maintenance costs over the life of the assets, companies that are heavily focussed on the imported products are currently at an increased delivery risk due to disruptions in the global supply chain. This will negatively impact all capital expenditure, retrofit and maintenance projects,” says Amir Vahdani, Steel Mains’ regional sales manager for Western Australia and South Australia and mining business development manager.
“As an Australian-owned company with two strategically located manufacturing hubs in Western Australia and Victoria, Steel Mains is perfectly positioned to support the Australian mining industry. For over a century we have been partnering with mining companies that have a longer-term view on their assets. They have realised that the use of the Steel Mains’ products lower their total cost of ownership – including capital expenditure, installation and operational costs.”
For the past 125 years, the company has been supplying fully protected and custom-designed steel pipes and fittings that support a wide range of industries, including the mining sector.
According to Vahdani, the support extended by the relevant government authorities has been instrumental to the company’s ability to continue its production uninterrupted.
“Fortunately, our fully Australian supply chain was not impacted under COVID-19 restrictions as our service was categorised as an essential service for the water industry. Uninterrupted production with local labours from Australian raw materials maximises the benefits for our economy through job security whilst the highest quality solutions are offered to end users,” he says.
What will supply chains look like in the future?
Going forward and once the crisis eventually eases, mining companies might consider implementing major shifts across their supply chains to ensure greater resilience.
Mitchell anticipates these to include a greater adoption of cloud-based network systems to provide better visibility to all stakeholders in real time. He also expects 3D and additive printing to gain more traction to manufacture essential components on-site.
Finding alternative and broader sources of supply to reduce reliance on a small number of vendors, as well as considering collaboration on supply chain hubs are other trends that Mitchell anticipates to shape the future of mining and metals supply chains.
“Over the last 20 years, we’ve talked about consolidating suppliers and controlling the number of suppliers that you’ve got. It’s still an effective business strategy. Is there an alternate supplier if something happens to your current one? Is this the time to consider collaborations with other producers?” Mitchell says during the EY webcast.
“If you are a copper producer for example, should you be talking to other copper producers about perhaps sharing some of your critical spares? A big advantage of that is it will have a big benefit in terms of your working capital because you won’t be needed to hold additional spares that you’ve identified yourself.”
Mitchell, however, points out that looking for alternative sources of supply should not come at the cost of jeopardising the mines’ relationships with their existing suppliers.
“Even as alternative sources are considered, companies must maintain good relationships with current suppliers that are critical stakeholders in the business,” he says.
Closer collaboration with suppliers
Austmine chief executive, Christine Gibbs Stewart, says some Austmine member companies have already stepped up collaboration with their clients to help them get through the crisis.
“During this time, the need for innovation and adopting new technologies (across the mines) has accelerated,” she tells Australian Mining.
“From implementing more automation and remote-working technologies to finding ways to better track the workforce on the site, mines are looking for ways to keep their workforce out of harm’s way.
“Some of our member companies have been opening up their space so that mining companies can work from that space. Others have accelerated the roll-out of critical technologies, using their existing knowhow and infrastructure.”
As an example, Enware, an Austmine member company, has ramped up its introduction of No Touch sensor tapware solutions and introduced Wheelie Clean – a portable hand hygiene station to provide better hygiene solutions to remote mines.
Other Austmine members, Pulse Mining Systems and Mideco, have joined forces to introduce Bat Booth 2.0 – an employee temperature checking booth that helps mining companies protect their workers from viral infections and heat stress.
Higher visibility across supply chain
Investment in technologies that offer visibility across the inbound and outbound supply chains is another key aspect for miners to anticipate and mitigate disruptions.
Motorola Solutions, also an Austmine member, has demonstrated a good example of this by helping client, Rio Tinto Aluminium, deploy a back-up communications solution for its Integrated Operations Centre (IOC) in Brisbane within just five days.
The system enables continued critical communications between mines during an emergency by enabling the IOC to continue providing 24/7 monitoring of all safety, production and quality aspects at remote Rio Tinto mine sites.
“We provide a variety of solutions to increase visibility and performance across our customers’ supply chains,” says Martin Chappell, general manager for energy, resources and industrial sectors for Motorola Solutions Australia and New Zealand.
“Among them are mission-critical voice networks that mining organisations depend on for clear communication from mine to port across some of Australia’s longest private rail networks. This helps mining organisations to deliver iron ore loads and other cargo on time, while increasing efficiency across their entire operations.”
Gibbs Stewart says more transparency between governments and METS companies will enable companies to better respond to the sector’s requirements in the future.
“The (national COVID-19) protocols that were put in place early on ensured that the mining industry was as a whole better placed than many other industries to be able to remain operational during the crisis,” Gibbs Stewart says.
“Going forward, we expect clear and consistent communication from the federal and state governments so that our member companies can understand where they stand in terms of travel restrictions and export limitations so that they can plan accordingly.”