Digitalization: Light at the end of the tunnel for the metals and mining industry

The metals & mining industry forms the core of industrial development as it provides elementary raw materials for most of the downstream industries like power, steel, cement, aluminum, etc. With GOI's focus shifting on creating a more "Atma Nirbhar Bharat", India has seen an unprecedented rise in mineral consumption. It would be an understatement to mention that we are living in the most resource-intensive period in the history of Indian industrialization.

The metals and mining industry has been dogged by several persistent issues like geological uncertainty, market volatility, operational hazards, etc. Though miners have been one of the early adopters of technological or digital advances most of those digital efforts were on improving operations and not process-oriented areas such as procurement and supply chain. As a result, even the digital leaders of the industry are relatively 30% less digitally mature as compared to their counterparts in the chemical and automotive industries.

Challenges digitization can address

According to a DAI survey, manual and fragmented procurement cycles are still a norm in nearly 75% of companies. Complex, paper-heavy processes, irregular quality, compliance, delivery risks, etc. are some of the common challenges that plague this industry.

Reduces overheads and errors

All procurement that happens can be categorized into 2 broad categories - Raw materials and non-raw materials also called, direct and indirect procurement. Especially in the case of indirect procurement, we have seen transactions can be 10 times higher than direct raw material purchases. This number may be exponentially higher in large, global organizations with local sourcing functions and geographically disparate processes. Manual handling leads to laborious procurement cycles that might result in inventory and supply chain challenges. Furthermore, as high as 60-70% of vendors in the indirect procurement process contribute to only 4-5% of the overall spend, which skews the effort-to-output ratio of the entire process.

Absolute visibility

One of the challenges of traditional industries like metals and mining is heavy reliance on unstructured business communications like voice calls or texts, wherein information either doesn't reach the intended endpoint or gets lost in translation. Also, it would be difficult to ascertain the value of the data loss that can happen as a result of unstructured communication. Digital supply chain procurement solutions enable seamless integration with various partners in the value chain to help bring in visibility right from the placement of an order, to the payment process and to its eventual delivery, an experience that is very similar to that B2C purchase cycle.

Well managed inventories

In organizations that have multiple plants spread across different geographies, with their unique characteristics and related technical capabilities, it is common practice to work in silos, having their own set of processes. A lot of procurement also happens locally leading to a gap that can run into supply risks. Digital solutions can centralize and consolidate inventory requirements across plants, thereby improving planning, control, and decision-making to bring efficiency in terms of cost, resources, and delivery.

Clears digital myopia

Trying to solve new-age procurement problems through legacy digital systems like ERP could result in digital myopia. The focus of legacy systems is not on analysis and optimization, but more on record keeping. New-age digital procurement solutions gather and analyze data to optimize cost and achieve efficiency. These new-age procurement solutions can easily integrate themselves into an existing legacy digital solution, which helps avoid a complete digital overhaul, ensuring further optimization of cost and a higher adoption rate.

The metal and mining industry has reached an inflection point. What merits discussion at this critical juncture is imbibing digital-only thinking into the very DNA of the industry to transform the way it functions. With GOI bringing in bold, game-changing policy decisions, now is the time to change.

Author: Jigyasa Kishore, Vice-President, TAAS-Enterprise Solutions, Moglix