Determine how the supply systems for remote locations could be improved

Read this Case Study and in a word document provide 3 or 4 recommendations. (Can be done in bullet points. Explain your position)

QMONT MINING Alice Winter, working on a summer internship at Qmont Mining, was trying to determine how the supply systems for remote locations could be improved.

QMONT MINING Qmont Mining, a major metals producer with headquarters in Vancouver, British Columbia, had extensive holdings all over the Canadian North. Supply management had been completely decentralized until very recently. A consulting study had recommended a move to more centralized supply management, including purchasing and logistics. The purchasing and stores manager at Qmonts largest mine in British Columbia, Harry Davidson, had been asked to pursue this idea and to make recommendations on potential improvements. Harry had hired Alice Winter, a college student in logistics, to work as a summer intern to assist him. Harry had said to Alice: A good project for you to work on is the way we handle supply for remote locations. I suspect that we could do substantially better, but I really dont have any hard data.

REMOTE LOCATIONS Alice found out that Qmont had 17 remote locations, ranging from three small mines that had a buyer/storekeeper on site to two mine start-ups, nine exploration sites, and three development projects with a distance of 5,000 kilometers (km)9 between the farthest ones and 300 km between the closest ones. Qmont made a distinction between exploration sites where the potential for ore was totally unproven to development sites where the possibility of mineralization had been proved, but where the extent of mineralization had to be determined. Qmont used its own drilling crews at these two types of sites, although most mining companies preferred to use contract drillers. Qmont managers believed that for security, availability, and cost reasons they needed full control and in-house crews. Typically, at both exploration and development sites an engineer or geologist would be in charge. All supplies for these sites would be flown in by bush planes on floats or by helicopters.

ACCOUNTING INFORMATION Alice Winter decided to visit the accounting department at Vancouver headquarters first to see what she could learn about supply in remote locations. She found out that accounting paid all invoices from suppliers who claimed to have supplied a remote location even when no confirmation of orders, deliveries, or receipts was available. This occurred in about one-third of all invoices. The accountant explained: Getting suppliers to provide odd requirements in a hurry and to get bush pilots to fly them in is a constant hassle. The last thing we want to do is lose the goodwill of these suppliers because we dont have our records straight and delay payments.

DEVELOPMENT AND EXPLORATION SITE DATA Alice did get the chance to review the previous years actual supplier invoices for three different sites (one development and two exploration) over a four-month summer period. Communication between actual sites and suppliers occurred in two main ways. Since site leaders were in regular contact via satellite with head office personnel in exploration or engineering, they frequently asked the head office contacts to place specific orders for them. In addition, it was common for remote site personnel to contact suppliers directly and place orders. Moreover, when a drill needed a quick replacement part, apparently it was not unusual to place orders with several suppliers at the same time in the hope that at least one would deliver quickly. Drill and crew downtime was seen as very expensive. The site accounting records showed that the total supply spend for these three sites totaled about $1,850,000. Of this total, approximately: $220,000 was for drilling equipment including drill bits and rods. $120,000 for MRO suppliers. $420,000 for air transport covering seven different suppliers, of which air transport of personnel in and out of sites cost about $170,000. $180,000 for fuel. $80,000 for food.

Alice uncovered 22 instances of multiple deliveries of the same item within days to the same site from different suppliers and 12 instances of multiple deliveries of the same item from the same supplier within a few days. There were 14 instances where the airfreight bill was at least 10 times higher than the value of the item transported.

NEXT STEPS After several weeks of gathering this information, Alice wondered what her next steps should be. One option would be to gather similar information for all remote sites to get a more complete picture and to extend the time period. Another would be to get more specific about the details of each order and each supplier. She knew that she would be meeting with Harry Davidson in a few days to discuss her progress and findings to date. She also expected Harry to ask her what she believed she should do next.