Receiving Materials at a New Mine - Setting Up
Friday 14 March 2014
Almaty Office, Kazakhstan
15°C Cloud & Rain
In our outline of setting up supply chain at a new mine, previous blogs have covered
- Management controls as they relate to Supply Chain
- Finance and SCM Coordination
- Logistics and Importation
This blog discusses Receiving of Materials.
Goods that are received ‘offshore’ are also finally received on arrival at final destination, usually at your main warehouse. Receiving is a disciplined process to avoid mishandled, lost or stolen goods.
Accurate and prompt record-keeping of receipts is important to avoid inaccurate inventory records, poorly costed non-stock purchases and delays to supplier payments.
It is strongly recommended that a dedicated and isolated receiving area is designed for incoming consignments, with a similar area outside for larger items. No persons are permitted into this area unless accompanied by dedicated receiving personnel. It is very common for non-supply personnel (often end-users) to help themselves to incoming needs prior to processing unless a solid process in in place. Dedicated receiving personnel will be accountable for losses.
On arrival of delivery vehicles / railcars, loads are photographed and manifests carefully checked to ensure all packages are present. After offloading, goods are checked against both the supplier’s delivery advice and against the PO/Contract. Discrepancies are reported to a supervisor.
Once cleared the goods are input to the Supply module of the company’s software program, the goods are transferred to collection points. If the goods are for inventory replenishment they are transferred to their permanent warehouse locations, which information is input to the Supply module. If goods are not for inventory, the requisitioner is notified and collects his goods; they are located in a holding/collection area awaiting collection. Reminders are sent concerning slow collection and transferred to long-term storage if not yet required.
When discrepancies due to damage in transit, wrong goods, poor quality goods, over or under supply are discovered, a Supply Discrepancy report (SDR) is raised and the warehouse supervisor will determine action to be taken, often in coordination with his manager, requisitioners and procurement personnel (who are responsible for discussions with suppliers). Goods will be held in an isolated discrepancy holding area until the problem is resolved.
Goods flow two ways and an efficient despatch procedure is required.
All procurement procedures will be supported by detailed manuals in relevant languages.
CBC is able to undertake and support this crucial element of setting up for an efficient mining supply procurement operation.
Importation & In-country Transportation for a New Mine
Thursday 13 March 2014
Almaty Office, Kazakhstan
15°C Sunny
Importation and In-country Transportation
In continuation of our last blog on the topic of Logistics special mention should be made for those mines that are required to import goods into countries in which mines are operating. Most countries have their own procedures but most follow the same overall process: registration of the company as an importer, registration of incoming goods, submission of a Customs declaration, checking of goods by Customs, payment of duties and VAT where applicable following which release of the goods results. Other requirements are often necessary, such as statistical logging.
While this seems straightforward it is hugely dependent on the accuracy of documentation. The slightest error or omission can cause delays and fines, or worse. It is therefore crucial to ensure that documents are all in order BEFORE they arrive at Customs in-country. Any discrepancies must be corrected by that time. Regular suppliers will know the routine and this may therefore be done while consignments are in transit, but for irregular suppliers that may not be familiar with customs procedures, this is done BEFORE the consignment is despatched. Your freight forwarding contractor must take responsibility for ensuring the accuracy of documentation that they handle.
Many countries allow pre-clearance and this cuts down clearance time on arrival of the goods. If goods are taken prior to completion of clearance procedures, there must be prompt follow up to ensure goods are cleared.
Customs clearance is a specialist task and companies should either appoint an agent or employ a Customs-authorised declarant. It is common that only Nationals can prepare and submit declarations. The agent or in-house declarant must be fully conversant with latest information, regulations and legislature and apply these without delay. Customs departments make a point of rooting out deficiencies and penalising heavily, sometimes long after the event.
If exemptions for duties and taxes apply, these must be handled in a timely manner.
It is not recommended that Customs agents / declarants are responsible for in-country transportation arrangements, as loads may be manipulated to increase revenue. Very often these parties are insufficiently knowledgeable about transportation to assure efficiency. A separate transportation company is recommended for all in-country haulage unless the mine has its own trucking facilities. A mining company employee must coordinate this.
All of the above points must be agreed in contracts with agents and declarants.
CBC is able to undertake and support this crucial element of setting up for an efficient mining supply procurement operation.
Logistics for a New Mine
Tuesday 10 March 2014
Almaty Office, Kazakhstan
5°C Sunny
In our outline of setting up supply chain at a new mine, previous blogs have covered
- Management controls as they relate to Supply Chain
- Finance and SCM Coordination
This blog discusses LOGISTICS.
Once POs / contracts are placed, it is essential that orders are expedited:
- To ensure on time delivery
- To resolve any queries promptly
- To maintain supplier relations – regular contact with suppliers means better service
- To allow time for discussions on packing, documentation and despatch
- If prepayment has unavoidably been made, to ensure that goods are actually delivered.
Be a ‘Squeaky Wheel’. The squeaky wheel on a cart receives the most attention and oil. Silence may result in supplier complacency.
Wherever possible take control over delivery of materials and equipment from as close to the point of manufacture/supply as possible. Suppliers will add a safety margin to pre-quotes concerning logistics and will add their mark-up to the final figure. Their means of transportation may not be suitable for your region, documentation may be inaccurate and you may lose the benefits of consolidation.
Arrange with an internationally-competent freight-forwarder to handle collections and shipments. Don’t be too economic: a little extra cost ensures better service and added value. Forwarders will arrange the most efficient and effective means of transportation and keep you aware of all of the unknowns of freighting that are impossible to be aware of otherwise. Arrange definitive contracts with freight forwarders so that everything is clear and there is no room for misunderstandings. Freight forwarders must also be responsible for goalkeeping documentation discrepancies so that there are no importation issues in transit and on arrival. Packaging must be checked and upgraded where necessary to ensure no damage during transit. Freight forwarders may also check that goods are correct but this is not always possible when goods are securely packed.
If pre-inspection is required, freight forwarders may help with this, especially where EXW deliveries occur.
Arrange for smaller consignments to be container consolidated from regular source regions (e.g. USA, Europe, Australia, S Africa). Regular schedules will be agreed. Containers must not be delayed unnecessarily waiting for “the next delivery due next week”. This WILL save on airfreight.
Airfreight must be minimised to substantially lower freight costs. Consolidation helps but so does ordering in plenty of time. To ensure this, airfreight must be costed and compared to more conventional (hopefully consolidated) freight costs and then approved by both the most senior person on the site (GM/CEO) and by the Head of Supply. Introduction of this measure instantly minimises airfreight costs, offsetting the nuisance caused by the extra work. Airfreight is subsequently limited to genuine emergency needs.
Freight forwarders must regularly report on the whereabouts of consignments and, for remote sites where delivery lead-times are long, they may also receive offshore (usually at extra cost) directly into your software; most ERP processes allow for this and it is a matter of working with IT to ensure restricted and secure access. The benefit is that receipts offshore allow for a more effective payment of invoices. If payment needs a site generated GRN, this may be weeks after shipment.
Offshore receiving has the effect of reducing mismatches where invoices are loaded in software before receipts. Mismatches are restricted to genuine matching issues which must be cleared by warehouse/procurement departments promptly.
Goods flow two ways and an efficient despatch procedure is required.
All procurement procedures will be supported by detailed manuals in relevant languages.
CBC is able to undertake and support this crucial element of setting up for an efficient mining supply procurement operation.
Procurement: New mine supply chain processes
Wednesday 5 March 2014
Almaty Office, Kazakhstan
0°C Sunny
In our outline of setting up supply chain at a new mine, previous blogs have covered
- Management controls as they relate to Supply Chain
- Finance and SCM Coordination
This blog looks at procurement, including project and operational purchases, inventory replenishment, work order needs, non-stock (direct charge) purchases and services.
Procurement needs are determined by:
- Approved Capital expenditure processing
- Inventory replenishment
- Planned maintenance needs (usually through work orders)
- Other budgeted operational needs for materials or services costed directly to end users.
Such needs are communicated by a fully documented procurement/purchase requisition, approved and authorised manually and/or electronically. For the acquisition to be completed effectively full and meaningful written descriptions are essential. Additionally, buyers must ensure that they fully understand what they are expected to buy; lack of understanding causes misunderstandings, delays and incorrect supply.
A corporate policy concerning tendering levels will have been decided. Tendering will vary according to corporate location and size. The policy may allow no tendering (single source):
- Up to an agreed value
- For contracted / FPA materials and services following formal tendering
- For OEM parts and materials
- For emergency and breakdown needs
All other tendering will require either by 3 qualified written quotations or be subject to a formal tendering procedure, depending on value and according to policy.
Bid evaluations are conducted commercially by procurement team and by end user technically if necessary. End user identifies ALL of the bids that are technically acceptable (and may identify preference) and Supply Procurement team selects the bidder based upon this; end user does not select supplier.
Procurement is by Purchase Order (PO) whether or not subject to contract / FPA. It is recommended that negotiations are conducted prior to selection of vendor and only subsequently where there is little risk of unethical practices.
Once orders are placed, procurement team is responsible for both ongoing supplier relations (including expediting delivery) and arranging delivery, see next blog.
All procurement procedures will be supported by detailed manuals in relevant languages.
CBC is able to undertake and support this crucial element of setting up for an efficient mining supply procurement operation.
Mining Supply Chain: Setting-up a New Mine: The Foundations for an Operating Supply System
Monday 3 March 2014
Almaty Office, Kazakhstan
4°C Sunny
As discussed in earlier blogs there are 4 main strategic supply chain stages during mine life:
1. During mine development and construction
2. At start-up
3. During change management
4. When performance fails to meet expectations.
Previous blogs addressed:
- Setting-up an operational supply chain: management controls
- Corporate structure in relation to supply chain
The full presentation covering setting up a mine can be seen on YouTube at:
http://www.youtube.com/watch?v=KXdwWT7VtgA
This blog discusses The Foundations for an Operating Supply System
In an earlier blog, coordination between supply and finance was discussed. Computer software for finance and management will have been selected and an essential prerequisite requires interfacing data between supply and finance. This includes transactional (dynamic) and informative data.
Transactional data includes all of the inputs on a regular basis. Materials issues, procurement activity, receipts and stock movements (transfers, adjustments etc.).
Informative data refers to both constantly accessible reports, such as inventory held (stock-on-hand), and to periodic reports concerning stock movement, outstanding purchasing commitments etc.
The framework for all of this data will by necessity be completed before a mine ‘goes-live’ operationally. Much of the IT process aspects will be undertaken by internal IT personnel in coordination with specialists from the software supplier, and it is essential that supply management is deeply involved too especially at the time that parameters are set. Supply and Finance will work together on setting parameters. Too often, parameters are set that do not consider all supply/finance eventualities and are difficult or impossible to change later.
It is advisable that supply team has dedicated resources at this stage, preferably from permanent staff. This additionally benefits familiarity and training.
Held inventory will be in millions of dollars and therefore careful attention in establishing correct selection of inventory to be held is crucial. On one hand, end users will want as much as possible to ensure that they have no supply problems during operations and on the other finance will want to ensure that no more than is essential is held in inventory. This is a fine balance: on one side too little will jeopardise production; too much will adversely affect the financial position.
Therefore it is necessary to establish a solid cataloguing procedure for all items held in inventory. This requires a formal approved request for stock to be held (often called ANSI) and must be carefully reviewed and approved by end-users, finance management and supply team.
It is important for replenishment processes that anticipated consumption is accurately determined to allow initial ordering and replenishment procedures to function effectively. Dedicated inventory control personnel are required at an early stage and ongoing. End users tend to overestimate and it is therefore prudent to minimise initial orders and allow subsequent replenishment techniques to correct any under-supply situations. The alternative is over-stocking, increased costs, over-inflated asset balances and shortage pf storage space, a common situation.
The aim of Inventory control procedures is to replenish in the right quantity at the right time. To ensure this a suitable inventory replenishment management procedure is a must. This can only be accomplished if a meaningful stock database is built.
Many ERP software solutions do not provide the depth of inventory management process to suit the needs of mining companies, especially in remote locations. Alternative/additional solutions are usually required.
CBC is able to facilitate this crucial area during the development of efficient mining supply operations.