Mining and E-Business

In today’s global economy–one characterized by unprecedented competition and quantum leaps in technological change–success is as often attributed to innovation in management techniques and practices as it is to marketing or operational excellence. While many industries have special and unique needs, there is hardly one that cannot gain by adopting technology solutions that deliver a solid and tangible Return on Investment (ROI).

This is indeed the case in the mining industry, whether it’s potash, diamonds, gold, nickel, iron or uranium. Mining is a business that can benefit from the use of technology and innovation in many areas including environmental impact, safety, logistics and globalization. Why? Because most mining companies are looking for ways to become the low-cost producer, to successfully compete in the global market. Connectivity among peers, employees, suppliers, customers (and even competitors) within defined processes, is helping improve business.

Internet-based Mining Procurement Reaches $200 Billion in 1999

In fact, it is this Web-enabled connectivity through the Internet and extranets that is already delivering extraordinary efficiencies and economies of scale to tens of thousands of companies all over the globe. It is called e-business, and it’s taking the business world by storm.

According to Forrester Research of Cambridge, Mass., procurement spending by the global mining industry totaled US$200 billion in 1999. And, says an article in the June 5-11 issue of The Northern Miner, 14 mining companies, including four based in Canada, have announced their intention to form an online global acquisition system. The 14 companies will invest a total of $100 million in the project. They expect to save as much as 7% on the cost of their purchases. Finally, Toronto-based GeoCommerce estimates that up to 75% of the goods and services in the mining industry can be traded electronically.

Such initiatives beg the questions–are you ready for e-business? As a market maker or user, do you know how to participate?

First, one should understand that e-business is not merely e-commerce, which is the buying and selling of goods over the Web. Rather, e-business is about transforming key business processes with Internet technology–but it’s about business first. The result is an interactive and transaction-intensive new channel that gives people the power to conduct business in more meaningful and effective ways.

So, e-business would include the “front-office” of businesses that face customers such as online store fronts, digital spec sheets, company Web sites, and company reports, as well as the “back-office” processes that include financials, inventory management and procurement. Integrating and automating the two offers potential for reducing costs, improving effectiveness, and extending availability and reach.

For mining companies, payoffs might come in the form of improved business research, increased sales, enhanced supply chain management, significantly reduced procurement costs, and deeper and more significant customer relations.

Effective Consulting Services Key To Success

Mining operations may use different methods and techniques for extracting and processing the various minerals according to their characteristics. Still, the need for streamlining processes, measuring, analyzing and sharing information, optimizing resource deployment, and communicating internally and externally are denominators common to all companies.

While the implementation of technology as a solution is important, matching the right solutions to your unique needs is paramount to realizing a successful transformation to e-business. In other words, in e-business, a good consulting company is worth its weight in gold… diamonds… potash… or oil sands… to help avoid costly mistakes.

For example, technology solutions targeted at Supply Chain Management (SCM) deliver the integration of supply chain information and processes from end-to-end. This streamlines the supply chain, reduces costs and improves accuracy. A knowledgeable consultant can redesign and implement new processes: internal, sup-plier-facing and customer-facing. The consultant may also design necessary system changes to support the new processes.

Enterprise Resource Planning (ERP) solutions can optimize and transform a business by integrating corporate information through the ERP to provide support for business decisions based on an optimized view of the entire organization. An effective consultant will discover your strengths, weaknesses, opportunities and competitive concerns with a proven process for ERP solution planning.

Customer Relationship Management (CRM) is another opportunity for improving outcomes through understanding what it is about your organization that a customer values. For example, is it strictly price or other key factors that differentiate you from your competition? Going beyond the obvious, consultants can help you unearth the true reasons, and develop and implement processes and information that help you leverage those strengths.

Information Modeling to Minimize Environmental Impact of Mining

In any mining operation, environmental impact is recognized as a significant factor. As environmental awareness has grown, so has the need for effective ways to measure that impact and to minimize it. Dealing with the natural surroundings in any operation means being able to learn the issues quickly and then disseminate that information throughout a corporation through communication channels such as electronic messaging or file transfers. Through effective communications, technology can help a company use its collective resources to solve problems.

The processing power of technology can also be used to help analyze the business weaknesses with regard to the environment, model the work to simulate impact, and develop steps to mitigate any negative impact. It can recognize areas where impact is less desirable, and then, for instance, show the result of using an alternative process developed elsewhere in the world. The advantage is that modeling proves a process is going to work before building bricks and mortar, or moving machinery into place.

Future solutions to environmental concerns would also likely entail new procedures being implemented to deal with “undesirables” at source rather than at final destination treatment. The key, however, would be the availability of pertinent information gathered and retained in data banks, and linkage with leading-edge processing. Tests could then be conducted in a simulated environment, results analyzed and recommendations made. The process would need to amalgamate expertise and information from a number of sources and then leverage the technology to help develop the best solutions.

Information would be shared between mining companies, scientific and regulatory bodies to maximize the effectiveness of the solutions. The advantages would be in speed and quality of solutions developed through co-operative exercises and information-sharing.

Safety in the Workplace–Top Priority

If there is one industry where heavy equipment, surroundings and processes might pose dangers to people, it’s mining. That is why striving to ensure worker safety is a hallmark of the mining industry.

Let’s look at the environments in which miners often work. A significant danger is usually exposure to heavy machinery and its emissions. Next, depending on the process, there may be airborne foreign chemical components. Then there are extremes in temperatures (internal and external) such as cold in the arctic, or smelting operations in warm climates. Add to this the risk of fire, natural disasters, and shift work that can play tricks on a person’s body clock, making them more susceptible to mistakes and therefore accidents.

The benefits of technology are in removing people from direct contact with any dangerous environment and allowing them to control or monitor the work from a safe distance. A few opportunities here are in robotics and computer controls, recording statistics and circumstances around accidents, and modeling new operational procedures that will improve safety.

Logistics: Natural Fit for E-Business Initiatives

The logistics of mining, beginning with a process starting at the natural resource, moving through the process and ending up with a client, pose exceptional opportunities for e-business. Evaluating, ordering, receiving, processing, recording, analyzing, measuring, storing and shipping are a few of the areas where e-business can help a mining corporation.

For instance, automating the logistic process of supply meeting demand can be very clearly felt both in transportation and in the organization of transportation. Selecting best modes, routing and timing are all areas where technology can play an important part. In addition, automated procedures involving areas such as financials and supply chain can reduce costs and enable companies to concentrate on core competencies.

Meeting the Challenge of Globalization in the Mining Industry

Mining companies have always needed to manage their businesses in many different ways. They have to deal with local governments, currencies, customs, business practices and languages. Many technology applications already include options that deal with foreign currencies, languages and customs.

Probably, the biggest payoffs for mining companies will come in ways and at scales not yet imagined.

Take, for instance, the example set by Goldcorp Inc. in setting up the “Goldcorp Challenge” on its Web site. The company “broke the mold” by sharing information about its orebodies around the world when everyone else knew that an orebody is not a sharable commodity. The results, in the form of expertise from some of the best minds in the world, will speak for themselves!

In effect, what Goldcorp initiated was a worldwide brainstorming session via the Web in which the company offered $500,000 in prize money to exploration experts to help find the “next” 6 million ounces of gold at its Red Lake mine in Balmertown, Ont. The strategy was to make available to anyone, anywhere in the world, a valuable proprietary geological database via the Internet, as well as software to analyze and depict this data graphically in 2D and 3D, plus an economic incentive to have the participants share their geological insights.

Within a week of launching its Web site, Goldcorp had attracted the attention of the mining industry on every continent and received 120,000 hits to the site. There had been 250,000 hits on the site within four months, and more than 1,300 individuals, corporations, domestic and foreign government geological agencies, and universities, representing 50 countries, had registered for the challenge. Goldcorp’s creative thinking in using the Web is proving to be a “master stroke” of genius.

In an increasingly global economy where success depends on enhancing knowledge, improving time to market and realizing new efficiencies to compete more effectively, e-business is a natural fit.

But, as IBM chairman and CEO Lou Gerstner cautioned in a guest commentary in a recent issue of Business Week, companies should not be blinded by ‘dot.com’ alchemy. They must think long and hard about the long-term impact of their plans before acting. Don’t get into e-business because everyone else is doing it, but because it is the right thing to do for your company.

The expanding need for consultancy expertise in services, such as e-business, led IBM to create a leading consulting organization which has developed into the world’s largest consultancy group, based on a recent international survey by Management Consultant International.

Few would argue that, before embarking on any major business transformation, it’s best to leverage consulting expertise to establish direction, method and probable outcome. Effective planning can only help ensure success.