COMPANHIA VALE DO RIO DOCE (CVRD), with the successful takeover of INCO and revenues of US$20.4 billion last year, is the worlds second largest mining and metals company measured by market capitalization. CVRDs global supply chain management practices, considered a source of competitive advantage, are a key component of CVRD Incos integration efforts.
CVRD and its subsidiary, CVRD INCO, are realizing the benefits of web-based e-procurement, including improving access to a global supplier network, achieving greater efficiencies in contract administration, consolidating spending, standardizing communication of order information with suppliers, reducing order and invoicing errors, and improving spending analysis. Using electronic procurement to support its growth strategy and improve profitability, CVRD anticipates saving between US$4.0 million and $5.0 million annually through supply chain automation.
CVRD has long considered web-based e-procurement part of its growth strategy. CVRD has sought to realize the benefits of automating its supply chain and improving supplier relationships, without assuming the unique challenges of developing and maintaining an in-house solution.
Indeed, according to a presentation about supply chain strategies by industry analyst firm ABERDEEN GROUP, Supplier networks are an ideal solution for some of the most vexing problems for SRM [supply relationship management] users, says Aberdeen group VP Vance Checketts. He adds, ERP [enterprise resource planning] automation is confined to the top 20% of suppliers, and thats only if youre lucky.
To address these challenges, CVRD uses QUADREM (www.Quadrem.com), a global e-business solutions and supplier network that connects CVRD to its suppliers in order to maximize supply chain efficiencies. To date, 7,000 of CVRDs worldwide suppliers have enrolled on this global e-marketplace. CVRD currently transacts with these suppliers using a suite of 12 electronic procure-to-pay (P2P) documents including, among others, request for quote, purchase order, order response, advance shipping notice and invoice.
Prior to being acquired by CVRD, Inco also implemented e-procurement using Quadrem, and current efforts will focus on further automating these supply chain solutions. Following the practices of its parent, CVRD Inco plans to expand its use of electronic document types, add over 2,000 vendors to its automated supply chain in Canada and use QuickPay, an on-demand financial settlement tool for suppliers. CVRD Inco is also planning to add Voiseys Bay Nickel in Labrador, PT Inco in Indonesia and Goro Nickel in New Caledonia to its electronic supplier network in 2007.
At the same time, CVRD and CVRD Inco are working jointly with Quadrem to introduce new functionality in logistics and service supplier management. This functionality includes new electronic service entry sheets, which will allow CVRD to communicate better with its service supplier base, improving compliance with contract terms and reducing invoice processing time and costs. The new logistics solution is aimed at providing greater visibility and control over the shipment of goods, enhanced control on lead times and overall improvement in warehouse planning.
The benefits of cost-saving supply chain automation extend to support growth and improve profitability by bringing greater efficiency and effectiveness to their procurement activities.
(Michael Busuttil oversees Quadrems North American operations and is currently focused on assisting CVRD, CVRD Inco and other mining companies in the region as they extend automation across more processes and more suppliers. For more information about procurement automation in mining, or for comments to this article, please e-mail Michael at firstname.lastname@example.org.)