Heavy-Duty Supply Chain

How Phelps Dodge Mining keeps supplies steady and manages capital costs.

What does a mining operation have in common with high-tech manufacturers? Quite a lot, says Nancy Mailhot, vice president global supply chain for Phelps Dodge Mining. Based in Phoenix, the company has mining and manufacturing operations in North and South America, Europe, Asia and Africa. The context is just a little different. "When we talk about supply chain at Phelps Dodge, we define it as starting with suppliers' suppliers and ending with our consumption," she says. It's not about manufacturing or buying piece parts, but keeping vital equipment running. During the steep declines that the industry is prone to, the company consolidates purchases with strategic suppliers so that when the pendulum swings back the other way, and production picks up -- as it has recently with the near year-to-year doubling of copper prices -- those suppliers will be able and willing to deliver. "You focus on the costs during the downturn, and focus on the speed and life opportunities during the upturn," says Mailhot. The company's primary purchases are giant trucks and shovels, and the diesel fuel and parts needed to keep them running. A single truck, for example, might have six tires. Each 12-foot diameter tire costs $15,000 to $20,000 and will last six months. A current project is tracking tire life at mine sites around the world. The company is monitoring how many miles the tires are driven, the tread styles, and where failures occur. Phelps Dodge will be able to analyze how its operations are impacting tire life, and also take information back to the tire manufacturer for possible design changes. Anything it can do to make the tires last longer increases the trucks' availability and productivity. Like a manufacturer optimizing its plant network, Mailhot's group is also supporting the company's "North America, One Mine" strategy. Rather than each mine optimizing at the site level, they're optimizing across the region. "It may be advantageous to slow production at one mine and increase it at another. Now you're optimizing a bigger piece of pie instead of optimizing several small pieces of pie," she explains. What this means to procurement is having complementary sets of spares that can be moved between mine sites, rather than have the separate sites manage their individual requirements. It also requires standardized parts and services. A supply-chain veteran, when asked how her task has changed , Mailhot says IT has made her job a lot easier. "The data we have available to analyze our spend and analyze our process and identify opportunities is amazing. I've been in [the] supply chain for 17 years. Never has information been so good."

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