Future Proofing Procurement in Mining

Creating a more resilient procurement function to achieve high performance in times of high volatility in commodity prices.

Mining procurement teams face the unique challenge of dealing with the volatile nature of commodity prices. Combined with the fact that the acquisition of goods and services can make up to 95% of the AISC, procurement has a vital role in the accomplishment of the company’s strategy; ensuring material availability and achievement of production targets when prices are on an upswing, and reducing AISC when commodity prices start to go down. In addition, corporate leadership has also increased pressure for procurement functions to provide data-driven insights, improved business intelligence, and tangible results of its work.

To navigate these challenges, procurement functions need to futureproof themselves becoming resilient and responsive to new trends, challenges and opportunities.

Nowadays, we find mining companies approach to procurement are attached to simplified theories focused towards one of the four attributes of a procurement function – speed, cost, quality or compliance. When a company is partial to one of the attributes, the procurement function is likely to forego overall performance and create unintentional negative effects in one or more of the other attributes (exhibit 1).

Many mining procurement functions are skewed towards one attribute (often speed) resulting  in poor performance on other attributes.

The journey to future proof procurement

Procurement Maturity Curve

Future proofing procurement is therefore a prerequisite for organizations that want to keep up with the rapidly evolving world. We understand that future proofing procurement is a journey, and different organizations will have different starting and end-points. Future proofed procurement functions are transforming from a merely back office function, delivering more strategic value to the organization while driving down costs and providing insights. To be able to achieve these goals, organizations must transform their procurement function, and with it its legacy processes, practices and structures. Aligning them with the current needs of the organization. Companies often fail to realize the benefits by overlooking the challenges to future proof procurement.

Challenges to future proof mining procurement

Creating foundation elements to successfully future proof procurement

Spend assessment: Implementing a combined, company-wide view of spend, which is a summary of all spend typically shown by BU, supplier, and category. Enables procurement to obtain a fact-based understanding of the spend profile, including vendor fragmentation, categories purchased and transactions providing the data needed to drive improvements, and reduce purchasing cost.

Spend analysis will also provide the data needed to drive improvements across your procurement , such as;

• Eliminating maverick spend – maverick spending is the purchase of goods and services without using the accepted buying channels of the organization;

• Direct savings – by gaining insights in to spending and suppliers’ profile, companies often obtain savings by negotiating volume discounts, avoid duplicate payments, reducing overbuying;

• Risk management – advances the ability to observe their dependency on certain suppliers for critical categories;

• Category management – enhanced understanding of supply market and demands attributes allows for the classification of the category within different standards of how procurement should approach it.

Read about What is Spend Assessment​? >

Our approach future proofing procurement

An approach to transformation: To help organizations transform in order to increase resiliency and futureproof procurement, we offer a proven and pragmatic approach that is broken down in three services and can be tailored to your reality.

Procurement Assessment: to identify savings opportunities, assesses the current level of procurement maturity and pinpoints the gaps to reach the desired level of performance. Presenting improvement initiatives charters and roadmap to best achieve your goals.

Strategic Sourcing: to lower spend by identifying and assessing potential suppliers as well choosing and executing sourcing strategy and selecting the supplier that offers the best value. At the end of the sourcing process, usually an agreement is reached with thesupplier on what is to be delivered and the terms and conditions. Future Proof Procurement: deliver the changes required build a resilient operating model that is futureproof. This is done by performing the necessary changes in operating model, process, reporting and technological capabilities in order to deliver the lasting changes expected to your procurement function.

Read about Procurement Operating Model >

Value Dourado Consulting brings to the client

Future proofing your procurement function will help you identify opportunities and fulfill objectives.  bringing value by reducing risk and cost, and increasing procurement’s resiliency and responsiveness.

If you are looking to learn more, contact us

+1 647 936 1458
rafael@douradoconsulting.com

About us

Dourado Consulting is a Strategy Consulting Firm specialized in Procurement.

Dourado Consulting is committed to working together with you, our clients, in order to fully understand your needs, create a personalized approach exclusively made to tackle your unique situation.

We are committed to delivering actionable insights that are pragmatic and sustainable in the long-term.

Our capabilities include:

• Procurement Merger Due Diligence
• Procurement Post Merger Integration
• Procurement Transformation
• Operating Model Design
• Category Excellence

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