Mining Procurement Must Evolve Says Ngarda Civil and Mining

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The rising use of robotics and automation in mining has meant procurement departments will need to adapt to the changing nature of their job function.

Craig Simonds, Commercial Manager at Ngarda Civil and Mining, one of Australia’s largest Indigenous owned and operated contract companies, said that whilst the full effect of automation remains unclear, it will permanently change the mining procurement landscape.

 “Right now we’re seeing lots of uncertainty in the mining procurement industry. But I can be sure that 5-10 years from now, the industry will be fully automated. In fact, I don’t think we’re that far away from it,” said Mr Simonds.

As a result, mining companies will need fewer suppliers since sophisticated technologies such as automated trucks and driverless trains will replace workers and other equipment.

 “I think that’s the intent of automation. We’ll be going down this road where a company might have 5000 suppliers in the supply chain today, but they’re hoping to get it down to 2500. The only way to they can do this is to look for larger companies to take up more of their procurement sourcing,” said Mr Simonds.

A reduction in the need for suppliers is a concern since it will squeeze tier two and three suppliers out of the procurement industry, leaving the industry dominated by tier one suppliers.

However, automation also opens up a new market for high end suppliers who can provide miners with technology and software that cater to an increasingly automated industry.

Whilst Mr Simonds believes in the critical role automation plays within the sector, he admits it may not affect all mining companies. While large miners like Rio Tinto and BHO Billiton have the ability to invest in such technology, smaller miners and their procurement departments simply do not have the budget.

“With automation in our supply chain, there are large infrastructure and IT costs involved, and unless you’re turning over half a million dollars, you won’t be spending that much money,” said Mr Simonds.
 

“For smaller companies, it’s about ROI. You’re not going to spend 100,000 dollars on an IT solution just so you can get fully automated like other companies.”

Mr. Simonds feels that change in the industry is inevitable and that procurement departments in both small and large mining companies must simply manage this.

“And that’s the problem we’ll see as we start to go towards automation. There are a lot of companies out there that do it and want to find a solution, but what they’re in essence doing is cutting smaller supplier companies out.”
 

“I don’t think it [automaton] is necessarily a good thing, but it’s nevertheless something you have to deal with.”

If you would like to learn more about procurement in mining, you can attend the upcoming Mining Procurement Summit on June 24 - 26, 2013 - Pittsburgh Marriott City Center, Pittsburgh, Pennsylvania.

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