Supply Chain key processes - Codelco · 2018-05-02 · Jaime Bustos C. Strategic Sourcing Director –Mining processes Expomin 2018 May 2018 Supply Chain key processes - Codelco Productivity

Jaime Bustos C.Strategic Sourcing Director – Mining processes

Expomin 2018

May 2018

Supply Chain key processes - Codelco

Productivity as a key success factor

Copyrights © 2017 Codelco Chile. Todos los Derechos Reservados. | Copyrights © 2017 by Codelco Chile All Rights Reserved.

AGENDA

Overview

Productivity roadmap

SRM roadmap


Surface 800.000 km2

Bordering countries Peru, Bolivia and Argentina

Population 17,95 millions

Density 21,9 inhab/km2

GDP per capita US$ 24.000e

Inflation 2,7%

Main Exports Cooper, cellulose, sea products, Wine

Human development index

38

Language Spanish

Governmentsystem

Presidential

Life expectancy 80,5 years

3|

CHILE

*Last data available

Copyrights © 2017 Codelco Chile. Todos los Derechos Reservados. | Copyrights © 2017 by Codelco Chile All Rights Reserved.4|

27%

73%

20%

80%

34%66%

Others

MOLYBDENUM | N°2

NATURAL NITRATES

LITHIUM** | N°2

Others

Others

COOPER | N°1

Source: Cochilco, USGS and WBMS.*2016 preliminary data**Excludes USA poduction

100%

| N°1

CHILEAN MINING INDUSTRY


MILESTONES & PRODUCTIVE INFRASTRUCTURE


STAFFING & CORPORATE

GOVERNANCE

Board of Directors

3 directors appointed by the President of the Republic

2 Codelco employee representatives, elected by the President ofthe Republic

4 members appointed by the President of the Republic, fromcandidates proposed by the Senior Public Management Council

Chief Executive Officer

Own 18,605

External 47,098

Company staff


BUSINESS & DEVELOPMENT PLAN

Capture potential value from huge resources and reserves.

Access to the best market conditions.

Ensure financial flows to the State of Chile.

Others project in BDP 2016: Ministro Hales Underground, “La Huifa” (El Teniente) and North Resources (El Teniente)

0

500

1.000

1.500

2.000

Fin

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10

00

)

DEVELOPMENT PLAN (BDP)

BASE CASE(WITHOUT PROJECTS)

Chuquicamata Underground

El Teniente New Mine Level

Salvador Inca Open Pit

Andina Future Development

RT Sulphides

Other projects


AGENDA

Overview


SRM roadmap


KEYS FOR THE FUTURE

1. Continue focused on balance sheet strength.

2. Operating cost control program with focus on operational excellence and increasing productivity through all operating units.

3. Development of strong mining plans with a district business view.

4. Carry on with revised capital investment program to reduce risk and maximize value extraction from our world-class resource base.

5. Strong research & development commitment, with focus on solving productivity challenges.

6. Long-term program in place to convert Codelco into a benchmark in sustainable production of copper.


PRODUCTIVITY ROADMAP

GOALS

10 10

43,0

46,6

48,549,3

50,851,2 51,6

2014 2015 2016 2017 2018 2019 2020

0,0

0,5

1,0

1,3

1,6

1,9

2,1

2014 2015 2016 2017 2018 2019 2020

+20%

2017Budget

tCuf/FTE USDbn

Productivity Goals1 Cost savings Goals2

+13%2017

Budget

USD 2.1bn(1) Includes production and FTE of mining divisions, smelters and refineries.(2) Cost savings measured against 2016 Business Plan, except year 2015 which is compared against its Budget

Fuente: Abastecimiento Codelco

2019-20Permanent practices

2017-18Specific initiatives

2016Kick off

Productivity program startup. First initiatives deployed.

Specific changes implementation in our processes.

Productivity settlement like permanent practice.

Three step roadmap for productivity improvement: +20% to 2020.



RESULTS

11

1.338

1.650

1.933

2.187

547

980

2015 2016 2017 2018 2019 2020

Productivity 1

tCuf/FTE

Annual Cost Savings 2

MMUSD

433

358

312

283

254

REALPLAN

46,6

48,5

50,7 50,851,2

51,6

51,2

43

44

45

46

47

48

49

50

51

52

53

2014 2015 2016 2017 2018 2019 2020

+ 19%

+ 20%

Savings per year obtained each year

compared to budget

Savings per year based on 2018 business plan

+20%

Fuente: Abastecimiento Codelco

2019-20Permanent practices

2017-18Specific initiatives

2016Kick off

(1) Includes production and FTE of mining divisions, smelters and refineries.(2) Cost savings measured against 2016 Business Plan, except year 2015 which is compared against its Budget


Strategic Axis Initiatives 2017 – 2020:78 of Operation Units y 21 Corporate (examples)

Proactive maintenance development

E1

• Maintenance System• Models MARC/LPP analisys

High performance outsourced services

Best practices and synergies

Operational excellence“Lean Management”

Assets management

Innovation and applied technologies

E2

E3

E5

E6

E7

• KPI improvement – technical limits challenge• C+ Lean Management in Codelco

• Continuous improvement model of synergies and best practices transfer

• North District’s extraction model• Smelter and refinery model

Low Cost procurementE4$ $ $• Alternative Markets development and consolidation• Category Management Implementation

E8 Working Capital$

• Productivity Model implementation• Standardization of accreditation process

• Innovation Roadmap (Big Data – remotization)• CodelcoTech

• Warehouse management• Inventory management

12


Company Level

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am


AGENDA

Overview


SRM roadmap


AGENDA

Overview


SRM roadmap

- Focus on Business Sustainability


(1) Data: 2017.2% of foreign services: Shipping agent; Quality control; Engineering Services.

98%

SUPPLY CHAIN IN NUMBERS

Sources of services


(1) Data for 2013 until April 31 2017.

22%

18%

20%

7%

6%

3%

8%

14% remaining

2%


Sources of goods – by seller


(1) Data for 2013 until April 31 2017.14% remaining

34%

23%

13%

4%

3%

2%

4%

3%


Sources of goods – by origin



Year 2017

18

US$ 4.828 millionsthrough Supply Chain Organization

3.600 live Contracts to manage

Sole Source business decreasing from

1,9% (2016) to 1,1% (2017)US$ 3.604 millions

in Services

US$ 1.224 millionsin Goods

92.000 PO submitted

with 2.280 suppliers

~8.000 registered suppliers

4.743 active suppliers

Offer of goods and services

Sop

his

tica

tio

n

1063

4743

Codelco’s Approach IDENTIFY SELECT DEVELOP OPTIMIZE

insufficient Supplier Qualification

Active suppliersregistered in

different categoriescontaining

Complexity:

58 suppliers represent

50% of total spend

Copyrights © 2017 Codelco Chile. Todos los Derechos Reservados. | Copyrights © 2017 by Codelco Chile All Rights Reserved.19

DIMENSIONS CLASIFICATION

SCORE SEGMENTATION

S1

S2

S3

S4

AAAA – AAAB – AABA

AAXX – BBXX – ABXX BAXX

AXXX – BXXX - CXXX

DXXX and other variations

Top Suppliers

Good Suppliers

Average Suppliers

Poor Suppliers

Organizational Size

Financial indicators HSEC*

Human Resources& values

Innovation & TechnologyDevelopment

D1Operational

Sustainability

D3 D4

D5 D6

D2LetterScoreRange

B2,50 – 3,75

C1,25 – 2,50

D1,00 – 1,25

A3,75 – 5,00

Dimension Max. Min. Examples:

A A A AA A B CA B A A...

D3 A B C D

D4 A B C D

D1 D2 A B C D

D5 D6 A B C D

D3 D4 D2 D6

D1 D5

Criteria

33 criteria were grouped in 6 dimensions with a score ranging from 1 to 5

BUSINESS SUSTAINABILITY

Managing disseminated spend

IDENTIFY

* Health, Security, Environment and Community


Zones of weaknesses

SELECT


Managing disseminated spend - Gaps

Based on current Segment and Score, it is possible to identify potential suppliers and their gaps

Codelco has an overall view of supplier base score through the obtained information

Copyrights © 2017 Codelco Chile. Todos los Derechos Reservados. | Copyrights © 2017 by Codelco Chile All Rights Reserved.21

DEVELOP OPTIMIZE


Managing disseminated spend - Options

Direct Support Closing gaps through Codelco

support

Indirect Support Compensating Gaps through

associativity actions between suppliers

Collaboration

Options to close gaps

1 2

Sop

his

tica

tio

n

Sop

his

tica

tio

n

Sop

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tica

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n


• Manage supplier segmentation, and provide support to improve quality and sustainable results.

• Manage supplier segmentation, and promote associativity to improve market robustness.

• Continue challenging the market to obtain efficiency, effectiveness and low costs.

22

NEXT STEPS

2018-2020


Thanks

Documents

Supply Chain key processes - Codelco · 2018-05-02 · Jaime Bustos C. Strategic Sourcing Director –Mining processes Expomin 2018 May 2018 Supply Chain key processes - Codelco Productivity