Supply chain optimization in the mining industry

Introduction

In the complex world of mining management, the mining supply chain stands as a fundamental pillar for the success and competitiveness of mining companies. This interconnected network of activities, ranging from mineral exploration and extraction to processing, transportation, marketing, and final distribution, plays a vital role in the efficiency, profitability, and sustainability of mining operations.

This well-optimized chain can positively impact various aspects of the mining industry and products, including: cost reduction, productivity improvement, quality enhancement, increased competitiveness, customer satisfaction, and reduced environmental impact.

What is the Mining Supply Chain?

It is a network of interconnected activities or stages, ranging from exploration and extraction of minerals to processing, transportation, marketing, and final distribution of mining products. This mining value chain involves a large number of actors, including mining companies, equipment and service suppliers, transporters, marketers and end customers.

In this industry, a specialized approach and expertise is required to effectively manage the resources, materials and equipment needed to run mining operations. Some key aspects are:

1. Supplier integration: Working closely with suppliers ensures constant availability of required materials and equipment.
2. Inventory monitoring and tracking: Maintaining detailed inventory control optimizes resource utilization and minimizes lead times. Figure 1, shows a visual representation of “Warehouse Management,” innovative computer-based software for real-time monitoring of goods package delivery, computer screen displaying an intelligent inventory dashboard for supply chain warehousing and distribution.

Importance of the supply chain in the mining industry

Within the mining value chain, the supply chain is important and fundamental in the mining industry for the following reasons:

Efficiency in mining

Optimization can positively impact mining efficiency in several ways:

1. Cost reduction: This is achieved by optimizing transportation routes, negotiating effectively with suppliers, managing inventories efficiently, and implementing technologies that reduce waste and shrinkage.
2. Productivity improvement: Increasing productivity is achieved by synchronizing the different stages of the chain, eliminating bottlenecks, and implementing technologies that automate repetitive tasks.
3. Increased quality: This is achieved by implementing quality controls at all stages of the chain, product traceability, and the selection of reliable suppliers.

Increased competitiveness and customer satisfaction

1. Offering higher quality products at lower prices, while responding more quickly to market demands.
2. Timely and reliable delivery of mining products is essential to keep customers satisfied.

Optimization strategies

Optimization involves the implementation of various strategies, among which the following stand out:

1. Advanced technology implementation: the adoption of technologies such as the Internet of Things (IoT), Big Data, and Artificial Intelligence (AI) can significantly improve visibility and management. This is:

• IoT: IoT sensors can collect real-time data on equipment status, inventory, and shipment location, enabling companies to make more informed decisions and optimize their operations.
• Big Data: Analysis of large data sets can help identify patterns and trends that can be used to improve efficiency.
• AI: AI can be used to automate tasks, predict demand, and optimize logistics planning.

The following video shows some applications of AI in mining process optimization. Source: Sentian AI.

AI in mining - process optimization.

2. Supplier relationship management: Establishing and maintaining strong relationships with suppliers is essential to ensure a reliable and quality supply of the necessary inputs for the mining operation.

• Supplier selection: It is important to select suppliers that are reliable and able to meet the quality, price, and delivery requirements of the mining industry.
• Communication and collaboration: Constant communication and close collaboration with suppliers can help prevent problems.
• Evaluation and continuous improvement: Mining companies should regularly evaluate the performance of their suppliers and look for opportunities to improve the relationship.

3. Process automation: Automation of logistics processes can significantly reduce manual errors, increase efficiency, and improve safety.

• Automation of repetitive tasks: Automation can be used to perform repetitive tasks such as material handling, packaging, and transportation, freeing up labor for more strategic tasks.
• Robotics: Robots can be used to perform tasks that are dangerous or require high precision, such as subway mining and mineral processing. Figure 2 shows an autonomous self-driving
• truck used in the mine for transportation tasks in dangerous places without risking human lives.

• Logistics Management Software: Logistics Management Software (LMS) can help optimize the planning, tracking, and execution of operations.

How to evaluate the efficiency of the mining supply chain?

Within the mining management process, in order to evaluate performance in the mining value chain, it is necessary to have key indicators to measure the performance of the different stages of the process. In this section of the article, we will analyze the key performance indicators (KPIs) that allow measuring the performance of the different stages of the chain. Some of the most common KPIs include:

1. Total cost: This indicator covers all costs associated with the chain, from the acquisition of raw materials to the delivery of the final product to the client. A reduction in this indicator implies greater efficiency in resource management.

CTCS = Σ (Ci)

Where:

• CTCS: Total cost of chain
• Ci: Individual cost of each stage of the chain.

2. Lead time: Measures the time it takes for a product to go through all stages from extraction to delivery to the customer. A shorter lead time translates into greater responsiveness to market demands.

TD = Σ (Ti)

Where: TD: Total lead time, Ti: Individual time for each stage.

3. Inventory level: Indicates the amount of inventory held at each stage. An optimal inventory level allows for minimizing storage costs and avoiding stock-outs.

NI = (Initial Inventory + Received Inventory) – (Dispatched Inventory + Lost Inventory)

4. Customer satisfaction level: Measures customer satisfaction with the service provided. High customer satisfaction indicates a good customer experience and loyalty.

NSC = (Number of satisfied customers / Total number of customers) * 100%.

5. Other relevant KPIs:

• Productivity (P) : Measures the amount of mining products generated per unit of time.

P = (Quantity of products generated / Time invested)

• Quality: Measures compliance with product quality standards.

Defect rate = (Number of defective products / Total number of products produced) * 100%.

• Safety: Measures the number of accidents.
• Accident rate = (Number of accidents / Number of hours worked) * 100,000.
• Sustainability: Measures environmental and social impact.

Carbon footprint = (CO₂ Emissions / Quantity of products produced)

6. Audits and feedback: In addition to KPIs, it is important to conduct regular audits of this chain to identify areas for improvement and obtain feedback from all parties involved, including suppliers, customers, and employees. Feedback allows for adjusting strategies and continuously improving the chain’s performance.

Conclusion

The optimization of the mining value chain is a continuous mining management process that requires a strategic and proactive approach. The application of these strategies will enable mining companies to improve their financial performance, and contribute to sustainability and environmental responsibility in the industry. It is an ongoing effort that requires investment, innovation, and commitment, but the results can be transformative.

Optimize your mining supply chain today and take your operation to the next level!

References

Own source