What is the Optimum Supply Chain Network for a New Mine?
World Class Performance & Surprising & Powerful Insights
This company is a world-leading resources company that extracts and processes minerals, oil and gas, with more than 62,000 employees and contractors, primarily in Australia and the Americas and sales of $44 billion. Their products are sold worldwide, with sales and marketing led through Singapore and Houston, United States.
The company were opening a new mine with 90% of the volume going into export markets. They had previously contracted with a major consulting company to design the optimum supply chain but that work left them with more questions than answers. Specifically we were asked to provide a design which gave them a decisive competitive edge in terms of:
- Speed of (Re) Supply
- Ability to recover from natural disasters and man-made crises
We were asked as part of this to ensure that we had the lowest possible cost per tonne and world class (>98%) service levels to customers. In addition, we were asked to answer four key questions:
- How much can the mine reliably deliver?
- What is the best possible supply chain design including ports, hub facilities, etc
- What storage capacity is needed @the mine, ports and hubs
- How many railcars and what type (standard or custom built for increased capacity and faster loading / unloading - but higher cost)
- What is the optimum stock management policy (push, pull, or hybrid)
Using the Harmony Enterprise Digital Twin we built a very detailed and comprehensive ‘twin’ of the mine supply chain including details of the mining operation itself including planned and unplanned downtime and customer availability and working capital requirements of the customers.
Results & Insights:
Because the mine had only two products it was considered that of the questions asked the least consequential was seen to be the stock management policy while the port and railcar capacity was, before running the model, deemed to be the most important. Results showed almost the exact opposite:
- Pull strategy was seen to be the most impactful in terms of customer service, delivering the lowest cost per tonne and the lowest necessity of capital and operational expenditure in terms of port / hub storage capacity and railcars used. This was more rather than less evident the more complexity and volatility in terms of supply and demand were added to the model
- Showed how to obtain the maximum revenue from the production
- Built fully configurable model that can be reused by altering parameters
- Model is now being used to answer additional detailed questions around the detail of the mining and supply chain operations