Is it over yet? I ask this question often to my coworkers within the industry who are waiting hastily for the down cycle to finish. It's like we still have how to travel. During the supercycle, people imagined product prices will go up forever, people thought that the market will never recover. Neither hypothesis is correct, However, the very fact is that the cycle is lengthening, which suggests it could take years for the industry to regulate to plug forces. In my opinion, below are the highest 4 trends we'll see within the Metals and Mining industry in 2016 and beyond.
A. Operational Excellence Tops Corporate Priorities
Mining and Metal companies have spent many years cutting costs, upgrading operational efficiency, and stopping discretionary spending. Depressed commodity prices continued to threaten profits, generate a lower return on capital invested and undermine capital budget. These factors are challenging companies to revisit their core competencies, specialize in only things they're good at, partner with experts on other aspects of the business and drive ongoing operational improvements.
Rethinking supply chain: Massive supply chain challenges stem from the absence of confidence in suppliers’ performance and supplier capacity. Improved visibility on end to the top supply chain is important for better alignment with customer needs during this ultra-competitive environment. Reassessing existing supply chain structure, organizations can drive production gain and efficiency through co-opting suppliers into setting shared productivity targets, cost equation, and reforming industrial/labor/supplier relations.
Refocusing Capital Allocation: it's typical for traditional organizations to possess fragmented capital allocation. It’s hence difficult to attach capital spend to financial and operational returns. Centralized buying, better asset tracking, computerized preservation management help improve corporate detectability into spare parts, replacement and repair evaluation, cost and equipment performance and improve budgeting and forecasting.
Gathering Collaboration: Talent pooling, allocating infrastructure, partnering on capital projects, managing attainment as shared service within the industry are ways to think about to not only expand buying power and to extract economy of scale and scope but also reform relations with suppliers/competitors.
Advancing Working Capital: While the cliché “cash is king” is old, it never gets tired. Anticipating analytics and ERP consolidation help strengthen the main target on the capital lever to raised match inventory with market demand.