The time for digital half-measures is over
Those in the mining and metals sector who witnessed years of market underperformance and relentless cost-cutting are undoubtedly welcoming the recovery in commodity prices. As margins improve and companies generate more cash, the focus for mining companies is shifting to re-investing in long-term capital projects.
Brexit Europe and a shift toward inward-looking policies in the U.S. and elsewhere means global markets will remain unpredictable for the foreseeable future.
Despite this, the industry can’t afford to be overly conservative.
The recovery is real and expected to continue. It’s a critical juncture point for mining and metals companies, and hard choices must be made around where to invest.
The answer to this challenge starts by adopting a digital- first mindset. It’s no secret that the mining industry lags well behind others when it comes to the digital revolution. In fact, EY identified digital effectiveness as the number-one risk facing organizations in our Top 10 business risks facing mining and metals 2017–2018 report. The gap between the transformative potential of digital technologies and their actual adoption is still too large. It’s about more than just the adoption of technology. Digital holds the key to solving longstanding business and productivity issues in the mining and metals sector.
One great place start is robotic process automation (RPA).
Over the last few decades, we’ve seen various waves of technology leave a lasting impact on the world of business. RPA represents another such wave, with the potential to significantly reduce the requirement for employees to perform the many rules-based, high-volume (and often costly) activities needed to keep any business running.
RPA is software designed to automate common processes such as transactions, simple day-to-day communications or data manipulation. Automating these tasks and middle- to back-office operations is a powerful and relatively easy way for mining and metals companies to find the cash optimization they seek in several important ways.
Take contract management. Far too many mining companies spend significant time and resources manually tracking contracts, scanning for everything from compliance to ensuring figures are accurate and avoiding the need for follow-ups to correct errors. The technology exists to greatly reduce the amount of effort spent on contracts and other similar financial and transactions that, while important, siphon attention away from more strategic and productivity enhancing activities.
Imagine condensing complex contract management tasks into automated workflows, thus creating more time for project team members to manage and problem solve. In this way, small changes multiply over time and can fundamentally improve productivity.
Cost reduction isn’t the only issue – so is accuracy. People are prone to missing errors when performing repetitive, time-sensitive tasks. Software, on the other hand, isn’t. With greater accuracy and fewer manual processes to hold things up, contract management tasks can be completed much faster than before. Imagine what achieving true end-to-end digital commercial automation could mean for a mining organization, its vendors, customers and investors.
With growth back on the agenda, more capital projects will get underway. Along with them comes the usual flurry of contracts – and associated costs. It’s already clear that contract management robotics can help miners move with greater accuracy, speed and efficiency. But it also represents a very timely and sizable opportunity to make the traditional capital management process far less expensive – both by ensuring vendors get paid on time and by avoiding the costs of re-issuing or correcting invoices due to error. And all of this can happen without eating into the valuable time of skilled people.
Committing to a digital-first mindset is a strategic imperative.
Mining companies may have begun to pay back cash to shareholders, but their ability to continue doing so hinges on new projects being delivered on time and, especially, on budget.
Given that the mining industry has been slow to move the needle on digital transformation in recent years, miners must focus on the opportunity to use technology to improve performance.
Exploring the potential power of RPA, and digitizing contract management in particular, is fundamentally changing how projects are being executed. The benefits are there to be had. The time to act is now.
PETER BLAHNIK is a senior manager in EY Canada’s Advisory Services practice. He is based in Vancouver. For more information, visit ey.com/digitalmine.
Comments
Oliver Harris
Thumb up for bringing into discussion the ‘digital-first mindset’ as a response to the challenge of where to invest first in the mining industry!
In addition to this challenge, the increasing pressure due to the evolution of the cost – productivity ratio with respect to commodity cycle makes the need for alternative competitive differentiators stringent. Moreover, back office capabilities like inventory, processing or costing, are essential for asset-intensive industries like mining. Given the potential of RPA to improve these capabilities, digitalisation is precisely what is needed to boost competitivity of mining businesses.
Beyond cost reduction and accuracy that you also mention, if we also take into account the increased potential for knowledge sharing, the increased likelihood of expansion by targeting new markets, or the increment of operational safety, the importance of robotic process automation in the mining industry becomes crystal clear.