Supply Chain Integrity What is it

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Supply Chain Integrity What is it?
Issues in Landside Supply Chains

• Bob Bridges,
• Managing Director
• InterDynamics, Pty. Ltd.

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Purpose of Presentation

• To share insights into systems integrity gained
  from our supply chain peers.
• To grow awareness of issues associated with
  assessments of supply chain capacity, capability,
  performance and risk.
• To offer a simplified view of supply chain
  performance via Productive Pathways.
• To suggest how a focus on Productive Pathways can
  enhance supply chain integrity.

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InterDynamics

• 15 years experience in global export / import
  supply chains,
• Experience in alumina, bulk chemicals, coal,
  grain, iron ore nickel,
• Enabling global adoption of Fatigue Safe Systems,
• Servicing needs for assurance in planning risk
  systems integrity.

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Supply Chain Integrity

• What does integrity mean?

Coherence, congruence, impartiality, resilience,
transparency, trustworthiness, wholeness

• What does Supply Chain Integrity mean?

• Supply which is predicable and reliable.
• Supply which is capable and in control.
• Operations transparent to all stakeholders.
• Performance consistent with plans.
• Plans which are trustworthy.

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Supply Chain Design
Disturbance gtgtgt Operations In Control

• Sources of Disturbance
• Customers ?
• Lack of resources ?
• Infrastructure upgrades
• Maintenance
• Social environment
• Weather.

- like a spinning top, the system trends back to
a stable state.
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Strategic Landscape

• Global Demand exceeds Supply

We have entered an era in which global demand
for resources such as iron ore, alumina and
energy cannot be serviced by global supply
capability.
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Emergence of Oligopolies
This is also an era of Logistics consolidation
What are the Supply Chain power consequences?
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Competition Policy a new era?

• Competition between logistics service providers
  does not now guarantee fair pricing.
• Fair pricing has become the responsibility of
  regulatory competition agencies.
• Concentration of power has triggered change of
  controls over infrastructure investment.
• Supply chain stakeholders (including Government)
  now require transparent defensible
  infrastructure investment planning.

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Infrastructure Investment Risks
The overarching requirement is that timing of
infrastructure investment serves current and
future demands and keeps the Supply Chain
competitive.

• Invest too late
• loss of opportunity to exploit excess demands.
• Invest too early
• - Loss of competitiveness due to higher capital
  recovery costs.

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Operational Risks

• Unacceptable demurrage Queuing leads to poor
  utilization of available resources - ships,
  trains, trucks, crews, infrastructure, power.
• Loss of productive pathways due to congestion and
  outages.

To understand productive pathways we need to
focus on capacity and capability
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Capacity vs. Capability
Capacity
Capability

• Capacity is like the physical size of a water
  reservoir while Capability is like the current
  level of usable water in the reservoir

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Capability

• Capability is the outcome of
• Operating Mode Pull, Push, Pull Push.
• Limitations to accessing available capacity.
• The stability of processes.
• The effectiveness of integration of stakeholder
  operations.

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Productive Pathways
Mine Production
Mine Stockpiles
Rail Load out
Rail Network
Rail Un-loader
Port Stockyard
Ship Loader
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Productive Pathways

• Rail Path Diagrams provide views of rail pathways
  from load-out to un-loader,
• Productive Pathways are disciplined pathways
  beyond rail which include other stakeholder
  processes (e.g. mine, port, shipping )
• Supply Chain Productive Pathway a path from
  mine productiongt load-outgt railgtun-loadergt
  stackergt reclaimer gt ship loading.

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Planned Pathways
Planned - 8 paths. Actual ??????
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Pathway Lost
Infrastructure upgrade outage 1 pathway lost.
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Productive Pathway Lost
Crew unavailable 1 productive pathway lost.
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Pathway Lost
Locos / wagons / crew unavailable 1 pathway
lost.
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Productive Pathway Lost
Disturbed Rail Program 1 productive pathway lost.
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Path Losses
Tough year for BHP Billiton iron ore, June 28,
2006 Global miner BHP Billiton Ltd's profitable
iron ore business is set for a tough year with
flat production and ongoing infrastructure
problems flagged. President and chief operating
officer of Western Australian iron ore, Ian Ashby
told an industry briefing to be prepared for a
tough 2006/07 as the company is limited by
production. "Fiscal 2007 is going to be another
difficult year," he said. The company is
continuing to battle bottlenecks at its iron ore
operations in the northwest of WA, specifically
in the rail dumping and ship loading aspects. On
the production side, interruptions to expansions
would hinder growth in output with Mr Ashby
confirming production would be just one per cent
above last financial year's output of 96.7
million tonnes.
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Path Losses
.Iron ore was one of the biggest contributors to
BHP Billiton's record annual net profit in
2004/05 of US6.51 billion (A8.91 billion),
helped along by a historic 71.5 per cent price
increase for iron ore. This year BHP Billiton has
secured a 19 per cent price increase from steel
mills. Group president of carbon steel materials
Chris Lynch said the historically high demand for
metals from its carbon steel materials business
including iron ore, coking coal and manganese and
alloys meant most operations had been operating
at maximum capacity. "We also have the fact that
our operations are running flat out, there is
very little capacity to make up for any losses in
unforeseen circumstances," he said. "In the event
that we do have any outages it will be very
difficult to make that up."
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Path Valuations

• Iron Ore / Coal
• 100mtpagt2mtpwgt300,000t/day,25,000t/pathgt12paths/d
  ay _at_FOB US50/t gtUS1.25m/path
• Alumina / Grain
• 10mtpagt0.2mtpwgt30,000t/day,3,000t/pathgt10paths/da
  y_at_FOB US300/tgtUS1.0m/path

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Pathways Productivity
A focus on productive pathways can

• align the targets and language of all
  stakeholders.
• promote greater planning disciplines at all
  levels for all stakeholders.
• provide simple measures for compliance with the
  plan i.e. actual vs. planned paths.
• focus local overall performance improvements to
  reduce pathway losses.

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Binding the Stakeholders

• Supply Chain integrity starts with robust designs
  for infrastructure operations.
• Achieving integrity requires strong bonds between
  stakeholders.
• Productive Pathways provide a means to staple
  together stakeholder interests.
• Rail Pathways are positioned to provide the
  staples which can form strong bonds between
  supply chain stakeholders.

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Stapling Stakeholders Interests
Mine Production
Mine Stockpiles
Mine Load-out
Rail Network
Rail Un-loader
Port Stockyards
Ship Loading
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Path Risk Assessment
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Capability Determination

• Supply chain infrastructure.
• Resources and constraints.
• Operating mode.
• Productive pathway disciplines.
• Alignment.
• Commitment.

Accountability ???
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Building Capability

• Building capability incrementally along
  expansion paths requires

• transparent processes for examining and lifting
  constraints,
• consideration of the impacts of all stakeholder
  operations upon overall capability, and
• investment pathways for optimistic, conservative
  and most probable levels of demand.

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Pathways, Pathways, ..

• Productive Pathways
• Investment Pathways
• Hazard Analysis Pathways
• Accident Pathways
• Control Pathways
• Improvement Pathways
• .

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Seeing the Forest the Trees
Overwhelmed by the Forest
Focus on a Single Tree
Supply Chain Complexity
A Productive Pathway
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A Productive Pathway focus
and unlock latent supply chain capability.
Can simplify understandings of Supply Chain
performance
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Seeing the Forest the Trees
The Road Ahead
Productive Pathways enhancing Supply Chain
Integrity
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Our Endeavour is to add value to your Enterprise
bob.bridges_at_interdynamics.com