White paper. Software for the Mining Industry

Transcription

1 White paper Selecting ERP Software for the Mining Industry

2 Content Unique needs... 1 Integration more important than ever... 3 Selecting your software... 5 Conclusion... 6 About IFS... 8

3 Selecting ERP Software for the Mining Industry By Patrick Zirnhelt Director for Asset Intensive Industry IFS North America Selecting enterprise resource planning (ERP) software for the mining industry is challenging for a number of reasons. Most ERP products came out of the world of repetitive manufacturing, which means they are built around processes that are not appropriate for the mining industry. Mining organizations also typically need powerful asset management and project management functionality functionality which is often conspicuously absent from ERP packages. But ERP is becoming a higher priority as mining executives find themselves dealing with numerous wildcards including fluctuating commodity prices, a shortage of skilled labor and engineering professionals, increasingly global footprints and associated regulatory diversity. Merger and acquisition activity also will force mining companies to rapidly absorb newly acquired divisions into their standard business processes. Regulatory pressure to start specific divisions in a specific country or region also means mining companies must be able to manage multiple companies within a single, centralized enterprise software environment. The hodgepodge of software products mining companies tend to use today will not give the executive visibility or real time control to successfully execute their P&L responsibilities. Only mining software optimized for the project-driven and asset-intensive nature of the mining industry will be adequate. Unique needs For many reasons, mining companies may have found that existing ERP software is a poor fit for their functional needs. When compared to other companies a major vendor of ERP software may target, a mining company will have, if not different needs, some needs that are more pronounced than others. For instance: Mining is an anecdotal business, with mine planning start up, operation and decommissioning. Operational Real Time work breakdown structure (WBS) Project Management as well as a resource loading view of project management is therefore a core business function. Ideally, mine start-up, the permitting process, design, construction and other front-end activities ought to be captured in an enterprise application as a project. 1

4 Asset management, due to the asset-intensive nature of the industry, is obviously a lot more important. This needs to extend beyond simple Computerized Maintenance Management System (CMMS), and must encompass the entire asset lifecycle so executives can ensure they are maximizing financial return on capital assets. Preventive maintenance is of critical importance because asset failure can have implications for health and safety as well as the environment. Document management is a lot more critical to a mining company than members of many other industry sectors. Everything from equipment and mine design to certifications of employees must be tightly integrated with other enterprise application functionality. Some of this requirement may be due to the need for regulatory compliance and reporting, but it also has to do with the need to have current information on the state of the assets being operated, including as-designed, as-built and as-maintained specifications. Health and safety is of elevated concern for the mining industry because of both regulatory and practical concerns. This requires records on occupational injury, illness, incident tracking, fire safety management, first aid information, medical exams, material hazard information and more. For instance, if you have a safety committee, the list of who is on that safety committee needs to be integrated with HR. Other elements mining companies need to look for in ERP include: Integration capabilities to specialized Mine Planning and Production systems including Process Control Systems to capture production forecasts, plant condition data and inventory/material management. Project Management integrated with Sub Contract Management to manage third parties such as Civil Works Contractors and the like. Multi Currency management and project accounting. On Line/Off Line Mobile Computing. Sophisticated Workflow and Messaging. Flexible Web Services (Integration Tools). MS Project & Primavera Integration. Thin Client (Important in Remote Sites where normal communications channels are not available). Collaborative Portals (Important tool when working with EPC providers on remote sites). Risk Management. 2

5 All of these needs come into play to varying degrees over the lifecycle of a mine, but perhaps no phase is as challenging or as poorly addressed by most ERP and other enterprise software products as start-up. The ability to manage the permitting, design, equipment acquisition, construction and commissioning of a new mine as a single and contiguous project is such a daunting task that most ERP packages would not claim to be capable of addressing the early phases of a mine lifecycle. Meanwhile, other elements of ERP are fairly standard and comparable to other industries, including purchasing, and the ability to support multiple geographies, languages, currencies, countries and units of measure. Strong core financials functionality is always important. So the best of all worlds may be an enterprise software application suite that has all of the core functionality, proven and tested across many industries, with particularly strong functionality in document management, asset management, project management and health and safety. Integration more important than ever These unique needs and the degree to which they are a mismatch for most enterprise software suites may be one reason that the mining industry seems to be somewhat slow to truly embrace enterprise software. In many mining operations today, even those of considerable size, you will find them running an assortment of applications ranging from tier three or four accounting software, complemented by a number of other software products that are not truly running in an integrated fashion. This lack of integration will hurt a mining operation in a number of ways, but perhaps nowhere as profoundly as in the area of risk management and reduction. Recently, high-profile disasters, and the fact that many mining companies are involved with mine start-ups in new and challenging parts of the world, mean that asset integrity management is more top of mind than it had been in the past. More and more mining executives are looking at the various types of asset, operational, training and other information in their disparate systems, and seeing that it is in different files, on different servers, sometimes all over the world. Without a central repository of asset and operational data, corporate officers and senior management cannot identify and prevent the risks that can result in a disaster on the order of the Massey Energy Big Branch Mine explosion in In the Massey case, serious maintenance issues were present that almost certainly were not visible to senior management. These executives are commencing a review of systems including the more challenging areas of maintenance, human resources, financials and others to determine how they can be consolidated. One reason for this is corporate growth. As a company expands into new international geographies, often to tap into newly discovered ore or mineral deposits, there is a permitting process that really does require a company to examine its risk management practices. 3

6 As is the case with any company working towards a consolidated enterprise system, basic functionality including the general ledger, accounts payable, accounts receivable and other finance systems are important. Inventory, including maintenance inventory and general production inventory, are important. As stated above, there is a heightened need for maintenance functionality, and contract management might be a big component of maintenance because many mining companies outsource some or even all maintenance activities. Human resources must be well integrated, both to ensure that internal staffing is adequate, that individuals performing work have sufficient training and certifications and to ensure that good decisions are being made with regard to when to outsource. So what are the bad things that can happen without flexible and complete integration between all of these functions? You could fail to be notified of critical business events when they happen. You will be unable to truly track and manage project costs, including asset design and construction, maintenance shutdowns, refits, permitting processes and other anecdotal, project-related activities. You will have inefficiencies and delays in project start-up without an effective Project Planning and Scheduling tool. Changes will be made to the asset that you have no good record of, leading to asset integrity issues and potential catastrophes. You will not have the capability to ensure that any asset integrity management plan, asset management plan or project plan is being followed because everyone involved in a project or process is using different systems or even different data sets. You will expend non-value added work trying to collect data for mandated reports. Lack of thorough control over preventive maintenance and maintenance inventory could cause revenue loss for days if not weeks. Unlike many other industries, mining often takes place in remote areas where spare parts or materials may need to be shipped in over tremendous distances and rugged terrain. On the other hand, overstaffing for maintenance or overstocking maintenance inventory ties up working capital. Effective integration can help you balance the competing needs of cash management and reliability. You will be unable to efficiently plan and execute shut downs. 4

7 Within the mining industry, project management is so central to the business that it may function as the glue that holds an integrated application suite together. Within the IFS Applications project module for instance, you can actually create work orders, tasks and activities. This means that a project plan directly drives the individual steps in the plan. Similarly, management can track expenses and progress against milestones in real time. Lacking this tight integration between projects and the rest of the enterprise, even the best ERP system is like the newspaper. It will tell you what has happened, but only after it is much too late to do anything about it. In the mining industry, real time control is even more important than it is in most industries. Selecting your software Since this whitepaper is coming from a vendor of enterprise software, we obviously have a strong opinion of which enterprise software product is the best fit for the mining industry! But setting that aside for a moment, let s review some of the questions that a mining company executive in a software selection process ought to be asking of potential vendors: How many products do they need to maintain? Because the needs of a typical mining company are so diverse, many ERP software vendors will come to the table with multiple products with point-to-point integrations. This causes a number of challenges, including higher license cost due to multiple products and limitations on the different ways the system can be configured. What system is used to manage preventive maintenance, and how does the system support other modalities including predictive maintenance? Where is the master of project data? Ideally, project data ought to be in a centralized repository that is accessed in real time by all parties. One-off reports, batch updates and other methods of handling project data prevent real-time visibility and control. Is the project data master going to be in your back office system, or is it going to be in a separate project management solution? How are you going to maintain getting it into both places and make sure they are synchronized? The answer is probably that you are not. Where is the master for asset data? If there are separate systems for asset design, maintenance, operation and contract management, you likely will not have a centralized asset data master. That is one more problem that can lead to asset integrity issues, asset failure or at the very least reduce operational efficiency. 5

8 How does the software maintain spare parts inventory? Is it in ERP, is it in EAM or is it in both? Ideally, spare parts inventory should be centralized with other inventory so the purchasing department can do what they do best in maintaining this inventory, leaving maintenance professionals free to maintain the asset. When you consider having to do a repair or replace decision on some critical equipment, where will you find the requisite data? This decision essentially becomes a total cost of ownership question. So is this information in the EAM system which might capture maintenance costs? How are those maintenance costs amalgamated with the labor cost associated with doing those work orders and repairs. Well, that labor data would require integration with HR. What about the outside contracts that also support the asset? That would be either in purchasing or contract management or both. In the end, all of that gets rolled up into your GL, which is more on the ERP side. So again, which system are they looking at to support major replace or repair decisions? How does the software handle health and safety tracking and reporting requirements? Hopefully, you don t have any significant incidents. But even the minor incidents need to be recorded and reported on in standard industry formats as mandated by regulators including the MSHA. Where in the system can you find data to support Part 50 Reporting including Mine Accident, Injury and Illness Report (7000-1) as well as other reports? Conclusion By the time a mining company decides to move forward with a selection cycle for enterprise software, their primary goal must be to have one system that can support all of the different activities they engage in. They must be able to handle project management, document management, risk management, maintenance, inventory, supply chain, human resources and other disciplines directly in their ERP environment. This allows for a few benefits: It delivers a lower total cost of ownership than licensing multiple software applications, perhaps maintaining point-to-point integrations between some of them. A single ERP solution frees your IT department from struggling with multiple technologies and multiple different systems that they need to maintain A modern ERP product based on a service-oriented architecture will be very scalable, so as a mining project is conceived and matures, functionality can be added. As a project goes from planning to exploration to production, a modern system like IFS Applications allows a company to ramp up hiring very quickly. 6

9 Perhaps no other enterprise software suite delivers the agility or scalability required by the mining sector to the degree of IFS Applications. IFS Applications has all of the functionality required, integrated applications in one package that is designed for modular, phased implementation. That is why Technology Evaluation Centers, after a side-by-side comparison with other products, deemed IFS Applications Dominant in its functionality for the mining sector. We encourage executives to conduct their own side-by-side comparison with this Technology Evaluation Centers Express RFI. Patrick Zirnhelt is the director of sales for asset-intensive industries for IFS North America. He has more than 17 years of experience working with enterprise systems, which includes software development, implementation and sales. He is a professional engineer registered in Ontario and holds an MBA specializing in management information systems from the York University Schulich School of Business in Toronto and a bachelor of science degree in mechanical engineering from Queens University, Kingston, Ontario. 7

10 About IFS IFS is a public company (OMX STO: IFS) founded in 1983 that develops, supplies, and implements IFS Applications, a component-based extended ERP suite built on SOA technology. IFS focuses on agile businesses where any of four core processes are strategic: service & asset management, manufacturing, supply chain and projects. The company has more than 2,000 customers and is present in 50+ countries with 2,700 employees in total. More details can be found at For further information, to info@ifsworld.com Americas Argentina, Brazil, Canada, Mexico, United States Asia Pacific Australia, Indonesia, Japan, Malaysia, new Zealand, Philippines, PR China, Singapore, Thailand Europe east and central asia BALKANS, Czech Republic, GEORGIA, Hungary, Israel, KAZAKHSTAN, Poland, RUSSIA and cis, Slovakia, Turkey, UKRAINE Europe Central AUSTRIA, Belgium, GERMANY, ITALY, netherlands, SWITZERLAND Europe West France, Ireland, Portugal, Spain, United Kingdom Middle East and africa India, South Africa, Sri Lanka, United Arab Emirates Nordic Denmark, Norway, Sweden Finland and the Baltic area Estonia, Finland, Latvia, Lithuania This document may contain statements of possible future functionality for IFS software products and technology. Such statements of future functionality are for information purposes only and should not be interpreted as any commitment or representation. IFS and all IFS product names are trademarks of IFS. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. IFS AB 2012 En Production: IFS Corporate Marketing, May 2012.