Mining companies face increasing pressure to enhance efficiency, control costs, and ensure sustainability. Implementing procurement best practices such as effective contract management, KPI tracking, and category management enables streamlined operations and stronger supplier relationships. SpendEdge empowers mining firms with data-driven procurement strategies that optimize the supply chain from requisition to invoicing.
Mining procurement:How do Procurement Best Practices help Mining Companies?
Urbanization, shifting global markets, and accelerated digitization have reshaped every aspect of business operations, particularly the mining supply chain. As organizations grow, sourcing and procurement functions play a central role in driving efficiency and delivering value.
Today, mining procurement stands as a critical pillar in overall business strategy, enabling Chief Procurement Officers (CPOs) to boost resilience, quality, and productivity across their supply chain. During the early phase of the COVID-19 pandemic, mining companies saw reduced demand and profit margins. But as economies bounce back, there’s an urgent need for responsive systems and agile supply chains in the mining industry to meet renewed demand.
Additionally, the shift toward environmentally conscious practices has spurred higher demand for metals, coupled with stricter expectations for emission reductions and ethical sourcing. These challenges underscore the need for smarter, more strategic procurement practices.
Mining procurement: 5 Key Procurement Best Practices in the Mining Industry?
Effective Contract Management:
The procurement process is heavily dependent on supplier relationships, contracts, and the balanced management of both. Developing contracts that support both parties, and ensuring that the company’s needs are met is imperative to meet demand, maintain strong business relationships, and produce efficiently.
Companies must also ensure that the drafting of contracts accounts for potential risks, enables timely decision-making, and meets all legal, environmental, ethical, and safety needs. Utilizing data-driven and well-established, standardized systems is a significant contributor to effectively conducting business, developing contracts, and ensuring sustainable success for the company.
Establish Clear KPIs:
Closely tracking the performance of all involved departments and employees, is imperative to the growth of any business, and helps stakeholders and CPOs to determine the ideal decisions to be made. Key performance indicators (KPIs) help companies track suppliers’ performance and make necessary changes, such as reviewing and amending the contract, or terminating partnerships in favor of more reliable choices.
Additionally, KPIs also help professionals track internal progress of the company, including quality of offerings, lead time, overall efficiency, costs and savings, and other crucial metrics that indicate the success or shortcomings of a business. Establishing precise and clear KPIs helps companies develop a concise, efficient, and cooperative organizational structure.
Use Category Management:
The rising and effective use of category management has transformed procurement best practices, and made companies’ operations more efficient, sustainable, and organized.
Determining clear categories within the procurement department, and assigning category managers can provide CPOs and stakeholders with more precise, data-driven, and collaborative operations and insights to infer performance from, and improve upon the business.
The category management approach provides managers, and other professionals with clear insights into the performance of particular suppliers, shortcomings within a certain category, need for proper equipment or training, or the need for an additional partner.
Focus on Supplier Relationships:
Continuously improving upon performance, offerings, business relationships, and strategies is the most effective way to gain and maintain sustainable success.
As mining industry players struggle to keep pace with the rapidly changing regulations, sudden surge in demand, and changes in consumer preferences, finding the right supplier and maintaining mutually beneficial relationships has become more important.
CPOs and category managers must implement their contract and performance-based procurement best practices to further create and promote robust partnerships that help both parties achieve their strategic goals, and provide the company with the collaboration and support required to overcome all major industry developments. This practice will include revisiting terms of partnership, maintaining strong communication systems, and providing partners with the space to express their opinions and contribute.
Improve Contract Flexibility:
When companies and suppliers develop contracts in unison, there is often space for contractual flexibility, so that both parties may receive their demands without causing excess expense to either.
For instance, incentivizing certain timelines or projects, placing remediation costs, and encouraging the mitigation of high contingency costs. A strong legal team, clarity regarding the company’s goals and objectives, and transparency of the contract is essential to maintain a successful and flexible contract.
It is equally necessary to determine the nature of agreement, enable clear communication between parties to clarify financial matters, and establish relative transparency with regards to certain costs and terms.
Mining procurement: Guide to Optimize Procurement for Mining Companies
Purchase Request or Requisition
When an employee decides they need goods or services, the purchase request process should be simple and easy to use, with adequate controls to ensure compliance with business rules. Some helpful features include accessibility from any device, budget control to prevent exceeding budget limits, multi-level signature management to match approval workflow, and real-time stock check to avoid requesting items already in stock or on order.
Request for Quote
A request for quote (RFQ) is a request to one or more suppliers for pricing, terms, and product availability. Using RFQs can help manage the bidding process and obtain competitive pricing. Useful features may include sending the RFQ to multiple suppliers, sending reminders to suppliers who have not responded, tracking and comparing responses from multiple suppliers, and easily converting an RFQ into a purchase order with the selected supplier and pricing.
Purchase Order
Purchase orders play a vital role in managing a mining company’s procurement process. They help prevent duplicate spending, control budgets, track encumbrances, manage inventory, evaluate vendor performance, and serve as a legal contract with suppliers. Additional functionality can transform purchase orders into efficiency tools, including multi-level signature management, budget control, ability to split a line into multiple delivery sites, and real-time checks to link ordered items with open requisitions if appropriate.
Receipts
Receipt transactions record stock received from a supplier, documenting when, where, and how much product was received. Receipts add items to inventory for use while awaiting the invoice. Incorporating checks and balances into the receipt process can ensure accuracy and streamline downstream processing. Additional capabilities include defining matching tolerances, splitting received items across multiple locations/warehouses, recording quality check information for each item, and preventing damaged goods from entering available stock.
Invoice
Invoices are the final step in the procurement cycle and can be entered against purchase orders or receipt transactions. Features to promote efficiency and accuracy during the invoicing step include support for multiple statuses, linking invoices to purchase orders and receipt transactions for matching, and multi-currency support for global operations.
Success Story – SpendEdge Advantage
The mining industry is especially vulnerable to commodity price shifts, economic cycles, and regulatory changes. A mid-sized mining company, struggling with fluctuating demand post-pandemic, partnered with SpendEdge to improve their mining procurement strategy and build resilience across the mining supply chain.
Our experts identified critical gaps: weak contract management, underdeveloped supplier engagement, and lack of KPI tracking. By implementing targeted procurement best practices, we helped the client overcome inefficiencies, reinforce supplier relationships, and improve performance metrics. These changes allowed the company to scale production, reduce risk, and stay competitive in a rapidly evolving supply chain in the mining industry.
Conclusion
Adopting procurement best practices is crucial for mining companies to enhance value, boost production volumes, and manage costs effectively. By streamlining processes such as Purchase Requests/Requisitions, Request for Quotes (RFQs), Purchase Orders (POs), Receipts, and Invoices, companies can significantly improve efficiency and budget control. Utilizing process mining software and establishing clear procurement requests can lead to better pricing and competitive pricing through stronger supplier relationships and more accurate tracking of stock received and inventory. These practices enable procurement organizations to achieve substantial cost savings and maintain a robust supply chain that adapts to market demands and evolving industry standards.
