By KELLY LOUISEIZE
The mining industry is taking advantage of a new electronic marketplace that promises to reduce time and cost with the ease of a one-stop transaction centre.
The purpose of the e-marketplace is to facilitate supplier transactions through the Internet, says Wayne Smith, manager of purchasing warehousing and traffic at Inco Ltd. in Sudbury.
Inco is one of 15 mining companies that built the electronic marketplace called Quadrem, he adds. Since then, six more companies have come on board.
It began when some mining giants like Rio Tinto, Anglo and WMC Resources Ltd. realized they were missing some opportunities because the industry did not have an electronic facilitator that was specific to mining industry needs, Smith says.
He adds that most mining locations are not in major centres. They are spread throughout remote regions of the world. Some companies that were servicing the mining industry did not completely understand the procurement dynamics and the struggle to provide materials to remote sites.
Now with Quadrem, access to sites has become easier.
“The fact that we could play a role in the development of Quadrem attracted us,” he says.
The intention of Quadrem is to allow suppliers to make transactions with the 21 mining companies that are linked into the innovative purchasing system.
Previously suppliers had a choice to connect to each mining company separately. For example, if Inco wanted to buy load haul dumping machines, they would look to suppliers capable of providing the service. The communication process was a one-way channel where Inco would negotiate with
one supplier at a time.
“(The system) didn’t allow for flexibility,” Smith explains.
When he saw an opportunity to standardize the equipment, they jumped at it.
With Quadrem, the mining supply businesses can link into the one purchasing system.
“We see Quadrem as an opportunity to make the one connection and let the facilitator deal with
the issues of suppliers.”
This helps the mining companies reduce the cost of having a myriad of suppliers and focus attention on relationships that have been nurtured through the years.
“This doesn’t mean we have just one supplier, but for years we have been dealing with fewer higher quality suppliers.”
Smith says many of the suppliers are from the Sudbury basin, as well as from outside the Ontario area.
“Suppliers have continued to be successful at doing business. From what we have been able to see today, working with the e-marketplace has not affected the percentage of local to non-local suppliers in any significant way.”
The advantage for supply companies is that they can obtain useful knowledge through the transaction process. For instance, Quadrem allows for reverse auctions. This refers to the mining company choosing suppliers for negotiations on specific contracts.
Reverse auction is the process of bidding down the cost of a contract whereas common auctions ask for buyers to bid up the price of an item. It is through reverse auctions that suppliers can determine their competitiveness with other market suppliers, since they can see their bid and the company who entered the lowest bid.
“This is very transparent and therefore very obvious to the supplier where they stand relative to another supplier,” Smith says.
Understanding where the company is in the marketplace can be informative.
“If they can’t manage to be competitive, then they better think about the business they are in,” Smith adds.
Mining companies can see who is bidding for the contract and the bidding prices.
Approximately 12 reverse auctions have taken place from the middle of last year to the present day with an auction value savings of five to 15 per cent, Smith says.
Although Inco still uses paper-based tenders to fulfill some of the servicing needs, Smith hopes to maximize the Quadrem system.
“At the end of the day it is our belief that we will have a more efficient procurement process and be
able to move from paper to an electronic (forum).”