Emilie Ditton is a thought leading technology analyst for the mining industry (perhaps THE Leading one!). She recently finished a report on the unique approach that Roy Hill has to its operating model that uses technology as a key part. Roy Hill is in the middle of an ongoing journey and is for sure a thought leaders in the mining industry. Below are some parts of the story and if you want to download the whole thing click here.
The Transformative Role of Technology in the Mining Industry
August, 2017, Emilie Ditton, IDC
Roy Hill is a greenfield, open-cut iron ore mine located in Western Australia’s Pilbara region. The mine contains an estimated 2.2 billion tonnes of iron ore that will be mined over the initial 17-year operating life of the mine. In addition to the mine itself, the project includes a 55 million tonnes per annum wet processing plant, 344 km of heavy haul railway, a two-berth wharf for loading the ore for shipment at Port Hedland, and a remote operations centre in Perth. Construction on the mine started in 2011 and the first shipment of ore was made on 10 December 2015. Roy Hill was envisaged as an innovative operation to transform the way that a mining operation can be run. The company is using technology from SAP to help it innovate operations at the mine and create integrated operations that enable Roy Hill to transform the way it does business.
The following questions were posed by Emilie Ditton, Research Director for IDC Energy Insights, to Indrasen Naidoo, Director Supply Chain at Roy Hill, on behalf of SAP.
- What do you think is transformational about what Roy Hill has done with technology?
- Roy Hill’s operating model is designed to deliver 55 million tonnes per annum with a margin focus, rather than a reliance on tonnage volume for profitability as may be typically the case for mining operations. Crucially in support of our margin focus, at Roy Hill we have an Integrated Operating Model based on Systems Thinking and consisting of 5 systems – demand, supply, people, improvement and governance. The transformational nature of Roy Hill is that we endeavor to think about mining operations in ways different to the traditional approaches, and the technology strategy is then aligned to achieve that outcome.
Our technology choices support the Integrated Operating Model and margin focus strategy and where relevant, innovation that is fit for purpose and sustainable. Creating an organizational culture that thrives on innovation and improvement has been an important part of what we have done and this is supported by a leadership development program. In recognition of the disruptive impact of technology on world of work and future roles, there is organizational emphasis on “future proofing our people”
Allied to our technology deployment and innovation mindset is our particular focus on enabling disruptive technologies within our enterprise architecture such as Internet of Things (IoT), advanced analytics and mobility, and the way that we engage with vendors as partners to do that. We seek a collaborative approach in our vendor engagements and around key factors like intellectual property we maintain an integrative approach notably in collaboration related to innovation.
- What is the role that SAP is playing, and why SAP?
- The core piece of SAP software that we are using is SAP’s ERP ECC 6 EHP 7 including SAP Mobile Work Manager, Solman, Success Factors and Fiori capabilities.
The initial choice of SAP was against the business requirements when the company was at a project stage with a roadmap towards our present day landscape. These SAP applications essentially support the execution discipline at transactional level ensuring governance and control. Then, as the business moved towards operations we recognized that technology was required to support the advanced planning and scheduling disciplines in relation to our Maintenance, Repair and Overhaul (MRO) Supply Chain beyond the execution level of procure to pay. At this point we evaluated the SAP S/4HANA roadmap and concluded that if we adopted cross industry applications and adapted these, we would be able to address our needs. To this end we have commenced a path to SAP S/4HANA, with the migration to the SAP HANA database completed in April 2017.
Additionally, SAP have been open to engage and explore innovation. This has served as encouragement to move away from a purely transactional relationship based on value for money conversations related to purchases of commercially off the shelf software and consulting implementation services. And has enabled us to create a relationship that involves more collaborative value creation conversations that drive different thinking and innovation.
- Where is Roy Hill seeing opportunity for business value from the transformative power of technology?
- By adopting systems thinking in considering the applications of SAP S/4HANA, we believe it is possible to create a Digital MRO Supply Chain with advanced planning and scheduling disciplines. Coupled with integration to Enterprise Asset Management, this leads to a supply system that provides the opportunity to secure optimal asset availability in a manner which will be transformative to asset intensive industries and also reflect Industry 4.0 principles. We refer to this concept as the” Roy Hill Virtual Warehouse”.
The mine is still scaling to full production but a core part of our organizational design is to ensure that we are continuously creating value from technology and managing that change. Within our technology roadmap and assessment process, SAP and Roy Hill meet on a regular basis. We have made some significant investments as part of this roadmap development and deployment process. It is early days so currently we do not have a measure of business value to share. This implementation of SAP’s Integrated Business Planning (IBP) is a world first use case within mining of using this offering in this way. The innovation lies in the modification of the IBP solution concept to treat maintainable assets as customers. In our deployment, the equivalent of a financial, marketing and sales plan will be the life of mine plan, consensus demand will be comprised of maintenance demand for jobs/parts, sales history will be equivalent to maintenance history, and open customer orders in our deployment of IBP will be open maintenance work orders. This way, we will use capability that exists but in a completely different way. We are seeking to adapt this technology towards an “IBP for Enterprise Asset Management” solution.