Optimizing end-to-end performance in the mine-to-market value chain can be a main source of value creation. However, fragmented responsibilities often cause companies to overlook the big picture.
A definition of the mining value chain
The mining value chain includes all processes from the exploitation of raw materials to the delivery of products to customers. This concept has a very high value and importance in this industry. Proper value chain management can lead to a significant source of competitive advantage and value. Conversely, those that ignore their value chain are likely to face bottlenecks and constraints that limit their ability to transport and realize risk returns.
It should be noted that there is a very important distinction between supply chains that manage inbound and outbound logistics and warehousing, and value chains that consist of end-to-end integrated processes. Historically, comprehensive value chain management has not been a priority for mining companies. This has led to the creation of separate operations and multiple organizational structures in which responsibilities for optimizing processes are distributed among units, rather than as a comprehensive whole.
Mining value chains are also under pressure due to recent changes in commodity markets, as well as the existence of extreme price fluctuations, changes in the market structure with the entry of new companies and stricter regulations, as well as uncertainty from the conditions of the COVID-19 pandemic. At the same time, environmental concerns and new regulatory policies continue to impose major restrictions on mining activities. Companies are facing unprecedented pressure to increase resilience, flexibility, and productivity to remain competitive.
Being prepared to face strict regulations and reducing the environmental footprint are among the things that make a closer look at the value chain from mining to market more necessary. In this article, we attempt to outline how transparency in decision-making and the use of the right tools can help mining companies prepare for a volatile future. Those who continually reassess their priorities can strengthen their position in the current down cycle and expand their market share in the long term.
Mining value chains are a very complex process and must include all assets, including equipment (eg, trucks and shovels), processing plants, and rail and port operations. This in addition to making things more complicated, requires a wide range of activities involving a series of interdependent steps to get products to customers, many of whom live in other countries or on other continents.
Until today, the mining-to-market value chain was often defined in corporate offices, and this led to limitations in online coordination and information exchange. However, understanding the mining value chain as an integrated process can provide a holistic view of performance for companies.
The goal of improving performance from mine to market is to independently optimize operations, value chains, or business services to provide greater potential for the activists in this field. Research shows that the mine-to-market optimization process can increase revenue by 10 to 15 percent.
Improving mine-to-market performance relies on two fundamental factors:
- Organizational empowerment
- Data and technological structure.
Organizational empowerment includes an operational model for determining organizational priorities and training skills that an organization needs for organizational development, especially in technological fields. This empowerment begins with creating a mental shift where the mining value chain is viewed as an integrated process rather than a series of separate steps.
Data and technological structures refer to the infrastructure and collection lines, tracking, and clarifying operational data across the value chain. In this way, information technology systems are used to facilitate the integration and continuous evolution of the technology environment. In addition, advanced analytical models are used to help competent people in the decision-making process.
How to prepare for an unstable future?
- Creating transparency to improve the decision-making process in times of uncertainty
- Availability and use of appropriate tools
- Identifying, determining, explaining, and describing priorities
Digital technologies help remove barriers to entry and increase the scales of competitive advantage. Mining managers must ensure that their organizations rely on a sustainable business model by proactively anticipating, shaping, and structuring an integrated ecosystem.
The move to an integrated mining value chain is complex, but it is also a fundamental shift to enter a new path of value creation. Mining companies should develop a comprehensive mine-to-market perspective to play an active role in the short term and strengthen and expand their market position in the long term.
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