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Iron Ore Mining – Business Process & SAP Solution

Iron Ore Mining is one of the major Industry of Karnataka State in India. Bellary District alone in Karnataka houses about 60 Mines and produces over 40 million Tons of Iron Ore per annum. China was a major customer and of the 40 Million Tonnes Iron Ore produced in Bellary, 30 Million Tonnes was exported to China. In boom time Iron Ore was also called Black Gold and the Boom time began in early 2003 when China started gobbling up Iron Ore for 2008 Olympic Games. During this time the Iron Ore prices went up to 158$/Tonne and Mine Owners turned overnight billionaires.

Fortunately I got opportunities to visit two Iron Ore Mines and recent being Donimalai Mine in Bellary District couple of weeks back. I also had the opportunity to interact with few people working in the Mines.  Iron Ore Mining Industry is a good case study for implementing SAP. There are not many examples of SAP implementation for Iron Ore Mining Industry in India.

I have tried to outline here the various Business Process involved in Iron Ore Processing specifically in Indian Context:

It all begins with the Site Survey and Geological Benchmarking, where several rounds of Chemical Tests and QA Tests are performed to make sure the FE (FE is symbol of Iron) grade is above 60 % to make Mining commercially viable. Iron Ore produced for Export generally exceed 62% FE. Once the quality of the ore is assayed Drilling and Blasting is carried out followed by hauling the blasted ore to Crushers by Hydraulic Shovels and Large Dumpers.

Crushing and Screening:
Here the large blocks of Iron Ore are Crushed into small lumps. Most of the times the size of the lumps are specified by the Customers. The Crushing may happen in several stages like Primary Crushing, Secondary Crushing and Tertiary Crushing. After each Crushing Process there is Screening Process to separate the Iron from Non-Iron Material and few Additives like Binding Agents and Cleaning Agents are mixed in the process. Large Conveyor Belts are used to move Crushed Iron Ore from Primary Crushing Plant to Secondary Plant and from Secondary Plant to Tertiary Plant and then to Screening Plants.

In the final Stage of Screening i.e. Pre-Loading stage the Iron Ore lumps are segregated according to their sizes, which normally vary from 40 mm to 6 mm or as ordered by the Customer.

It is a visual treat to see several Conveyor belts moving Iron Ore Lumps from Crushing/Screening Plants to the Loading Plant. Loading Plant look similar to a large Crane with several control mechanisms to control loading. The Iron Ore is loaded into Railway Wagons or Large Trucks. Now the Iron Ore is ready to be delivered.Indian Iron Ore Mining Companies today suffer from fragmentation, disorderly competition and irregularly operation. This is resulting in declining quality of Iron Ore.

SAP Implementation should definitely help these Indian Mining Companies in terms of being better equipped to handle tougher competition as well as global recession.Refer to the below link for an old but interesting White Paper on what SAP Mining Solution can offer.

Iron Ore Mining Industry Business processes can offer Implementation Challenges across all SAP Modules like Sales and Distribution, FI and CO, HR, Material Management, Production Planning, Quality Management, Plant Maintenance and EHS.

Sales and Distribution – Regular Sale Order Process (with or without Contract) could be implemented. There would be export Sale Orders involving multiple currencies (USD or Euro etc) while all sales revenues would need to be accounted in local currencies (in this case INR).  Inquiry Process, Quotation Process would also help.

Shipping and Transportation Planning would play a major role in Mining Industry, the costs involved in Shipping and Transportation is very critical in bagging orders. India Mining Industry today is suffering due to high Shipping and Transportation costs, Shipping fee of Sea Freight in particular is very high (Reference Link ). Both Road and Train are used to transport Ore to the ports. Transportation by means of Road is very much evident today and this could be an EHS (Environment Health and Safety) risk that needs integration with SAP EHS Module.

SAP Transport Management (TM) can be implemented to plan transportation, track orders, calculate transportation charges and also help subcontracting and tendering transportation services. SAP TM can be integrated with SAP ERP Systems.

Production Planning – All the Pre-Crushing processes can be mapped to one Plant (Mining Plant) and following by Crushing plants and Screening Plant and Loading Plant.  The Production would happen in Batches and Batch Management with Batch Characteristics needs to be implemented.

Master Data like Material Master and BOM (one of two levels max) should be simple but there would be large number of Work Centers and relatively complex Routing with multiple operations. Standard Planning Strategies like Made-to-Order (20), Made-to-Stock (10) and Planning with Final Assembly (40) can be used. MRP would generate the Purchase Requests or Production orders or Subcontract Requests.

Regular Production Order Process integrated with Batch Management and Back flushing of components (Eg: Binders, Cleaning agents) can be implemented.  Product Costing and Capacity Evaluation would also help.

Alternatively Production Process with PI sheets can also be implemented.

Quality Management – QM would require both Qualitative and Quantitative inspections here. Example for Qualitative inspection is FE % and example for Quantitative inspection is Iron Ore lump size. The inspection is performed for each Batch and necessary Quality Certificate is to be generated.

Material Management – It would be interesting to handle Procurement of Explosives for Blasting Operation. Explosives Procurement is subjected to specific Licensing/Government regulations and several documents along with Purchase Order are to be generated. Integration with SAP EHS module would be another key feature to handle.

With regular Procurement cycle other scenarios like Subcontracting Cycle, Import Purchase, Scrap Disposal, and Issue of Tools and Explosives to Subcontract/Internal Production etc are evident.

Plant Maintenance – Most interesting and most critical for this Industry would be Plant Maintenance Module. Since several Heavy Equipment like Hydraulic Shovels, Dumpers, Motors and Pumps etc are involved in every phase of Mining and Iron Ore processing. The breakdown is very common so both preventive and breakdown maintenance for all Equipments plays an important part. Both Mechanical and Electrical Maintenance would be evident.

EHS – Environment and Health Safety is an important aspect for Mining Industry. Industrial Hygiene and Safety component of EHS Module can be implemented to define and manage Industrial Hygiene and Safety measures within the company. Creating risk assessments, recording and processing accidents/minor injuries, also generating Standard Operating Procedures and Accident Reports would be required.

In Mining Industry EHS would be integrated with most of the SAP Applications/Modules. Some key processes with require EHS Integrations are Shipping and Tranportation of Iron Ore, Procurement of Materials like Explosives etc, execution of Mining Orders (this involves Blasting Operations).

Some useful links related to this topic:
Getting Started With Mill Products & Mining

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  • Thanks for sharing your understanding about the Iron ore industry, especially in Karnataka (India).
    Please note that several Indian Mining companies, e.g., Singareni collieries, Orissa Mining Corporation, MSPL, MEL, Vedanta Resources, Tata Steel, Great Eastern Energy etc., have adopted SAP solutions.

    In addition to the solutions mentioned above, SAP Industry solution (IS)-Mines is a major enabler for Mining specific processes.

    Traders & Schedulers Workbench (TSW), a component of IS-MInes is especially tailor-made to handle the marine, rail, road transportation requirements of Mining companies.

    Also, Remote Logistics Management (RLM), another component of IS-Mines, is useful for optimizing the spare parts and MRO inventory being carried by different remote mine / processing sites.

    And commodity pricing, 3rd component of IS-Mines, helps in contract management, assay based pricing and stage-wise invoicing.

    Do let me know, if any one needs more details.

    Nikhil Chaturvedi
    IBU-Mill Products & Mining