The last two years have presented numerous challenges to global supply chains, including for the resources sector, hampering the ability of sourcing managers to secure supply. Therefore, effectively securing inbound supply from key global export markets has become more important in these uncertain times.
While there may be numerous challenges that are disrupting global supply chains, immense value can still be achieved by getting global sourcing right. Axis Group International, an Imperial company, has supported mining projects and operations with global procurement and supply chain solutions for over 20 years. We share insights on how to proceed with global procurement in the current complex environment.
Unprecedented levels of supply chain disruption
Although Covid-19 remains a primary cause of many of the recent global supply chain woes, the converging of numerous factors further exacerbates the ongoing issues. Two risk areas stand out that create significant challenges for the mining industry:
1. Travel restrictions make it difficult to tap global supply
Restrictions to international travel due to Covid-19 are still significant, especially for some countries. Despite most of the world opening up, China maintains a zero-Covid policy that restricts travel both domestically and internationally. This is a major concern for the mining industry as China is one of the largest exporters of mining-related equipment.
Additionally, beyond the human tragedy, the Russia-Ukraine war has also created a unique and challenging global sourcing environment. With Europe being a major hub for high-technology equipment and technical machinery, further escalation of the conflict can disrupt trade from this region, impacting mining operations worldwide.
2. Lingering logistics challenges exacerbate levels of risk
Port congestions at most major ports around the world have resulted in delays in expected arrivals, as well as increases in supply chain costs. Moreover, global shipping experienced numerous impactful events in 2021, such as the Suez Canal blockage, closures of two of China’s major ports of Shenzhen and Ningbo due to Covid-19 outbreaks, and US port congestion in the latter part of the year. This resulted in average vessel delays increasing from about 4.1 days in 2019 to 6.9 days in 2021. The depth and breadth of these disruptions are being felt across all regions and industries – and mining supply chains have not been spared.
Gaining advantage despite increasingly complex global supply chains
It is imperative that procurement and supply managers in the resources sector know how to successfully navigate the current environment.
1. Leverage strategic intelligence and ensure prudent risk monitoring
These are uncertain times and volatility is a common factor for all. Top supply teams should have access to the right information early to support decisions and navigate the risk. It is crucial to have a good risk monitoring dashboard with real time (and forward looking) information about risky regions, markets, and supply clusters; problematic routes; raw material availability; price trends; and an array of other variables.
This would enable a risk matrix that measures and tracks key risks, probabilities, and appropriate response plans. These processes and tools have never been more important in order to ensure an agile supply capability.
2. Utilise in-market partners to identify top-tier suppliers, perform QA/QC, expediting and logistics
Despite travel restrictions in major export markets such as China, partners with on-the-ground resources can perform necessary tasks to ensure that appropriate suppliers are selected. Limitations such as language barriers or lack of information from secondary research can hinder sourcing managers’ ability to identify the right fit for their sourcing needs. For example, an online pre-qualification survey is not enough when selecting suppliers for high-value capital equipment. Factory visits, supplier audits, and prequalification are just some of the services the right partner can expertly do.
Since high-value capital goods require multiple inspections throughout the manufacturing cycle, an on-the-ground, cost-effective solution to provide on-site shop floor quality supervision and testing, project progress expediting, packaging management, and logistics management, among others is vital.
3. Effectively leverage China and new alternative global supply markets
China’s role as the largest global supplier should be appreciated; however, there are several emerging markets that have grown in the rankings amongst the top global exporters. Mexico, Vietnam, India, Poland, Czechia, and Turkey, have steadily increased their share of global exports, and are continuing to challenge the traditional export leaders. Moreover, successful global procurement requires making smart ‘supply cluster & category’ choices:
- Match appropriate categories dynamically to local procurement options, incumbent global suppliers, and emerging new alternative global supply markets.
- Get the right balance between responsible inclusive local procurement and global procurement.
- Do not sacrifice or cut corners when it comes to environmental, social and governance (ESG) goals.
When done effectively, global procurement presents a powerful lever for driving value in the resources sector – in projects but also in ongoing operations – that can reduce cost, manage quality, expedite schedules, mitigate risk, and ensure important ESG compliance across the supply chain.
- Kobus van der Wath is the Founder and CEO of Axis Group International, an Imperial company. In March 2022, Imperial became a wholly owned business of DP World. Kobus has been working in Asia for over 25 years and is currently based in Dubai and Shanghai. Axis Group solves complex global value chains – by driving cost and risk down in inbound supply chains, enhancing international revenue growth in outbound supply chains and managing cross-border complexities.