Rio Tinto: Managing Risk in Procurement and Supply
Contributor:
Mining IQ Editorial
Posted: 08/27/2012 12:00:00 AM EDT | 0
For smaller miners, they’ll approach risk and SRM differently, but Ms Dunham said it they should still focus on the basics.
Posted: 08/27/2012 12:00:00 AM EDT | 0
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In a mining boom, mining companies’ procurement departments are facing increased pressure to perform and deliver – and even Rio Tinto feels the pinch.
Cindy Dunham, Rio Tinto’s General Manager for Operations, Procurement in Western Australia said mining operations within the state face particular challenges.
“Western Australia faces specific risks in procurement. I think energy is a risk to our business. There’s no surprise to people here that things are getting more expensive, so cost is also a risk to our business,” said Ms Dunham.
“I think supply continuity is a risk too. Mining companies are purchasing similar equipment, product and services - everyone is fighting for the same things.”
To ensure reliable supply continuity, Rio Tinto focuses on effective supplier relationship management (SRM).
“I work on the principle of open communication with vendors and suppliers. I try to organise regular meetings with my team to make us approachable,” said Ms Dunham.
“The key is to be accessible, to openly and honestly communicate so we get win-win situations. Only then will each party get something out of the relationship.”
Being personable to vendors and maintaining a close relationship with suppliers comes in handy, but if anything goes awry, Rio Tinto counts on their risk mitigation strategies.
“From a category management perspective, we manage risk through each category using a risk matrix. We call it a ‘Risk Classification Model’ so we assess risk to the operations based on the consequence and likelihood of an event occurring,” said Ms Dunham.
“But risk is very broad. It can be from a safety or country perspective, quality or business continuity risk. For each category, there will be a manager who will assess the specific risks, they’ll work with the stakeholders of their operations to consolidate those risks and agree on mitigation strategies.”
As is one of the world’s largest miners, Rio Tinto’s approach to risk is as complex as it is thorough.
For smaller miners, they’ll approach risk and SRM differently, but Ms Dunham said it they should still focus on the basics.
“I think it’s less about the branding of your company, and more about the relationships. I don’t think it matters where on the scale of things you are, it’s important you build relationships with your suppliers and that you build that mutual win-win partnership,” she said.
“At the time when a risk happens and mitigation strategies are enacted, it doesn’t matter your company’s size, the truth is: suppliers will look at the relationships they’ve formed. It’s important to their longevity to look after their key customers – and that doesn’t always mean how much a company spends.”
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Contributor:
Mining IQ Editorial |
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