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E-Sourcing Mining Equipment

by Pakshaal S. Shah , Lead Analyst, Metals & Mining

7 September 2019

Abstract:

Today, it is possible to source everything from pins to planes, online. The mining industry is no exception to this and there are various consumables being sourced for the industry through the digital interface. Mining equipment used for various operations such as loading, hauling, excavating, grading, leveling, etc. can be procured from online channels

Listed below are various options for sourcing mining equipment online

Buying Equipment from the Marketplace
Online Auction
Buying Used Equipment from OEMs (Original Equipment Manufacturers)

Further, OEM parts and attachments are also available for sourcing via online channels. It is to be noted that the procurement of new equipment involves sending online enquiries as well since the equipment prices change based on

Trending raw material prices
Volume of purchase
Type and length of contract

The primary reasons propelling the demand for online sourcing are

Large and worldwide overview of available equipment
Gradual entry of tech savvy millennial workforce into the industry
Availability of smart phones with fast internet which helps track industry dynamics on the go

Key Highlights

The marketplace model provides a global view of the used equipment available
While registration for bidding may not involve any expenditure, the refundable deposit may have to be deposited as 25-30% of the desired bidding limit
In general, OEMs have a higher profit margin on selling used mining equipment than new equipment. This is mainly due to customized repair and refurbishment, which makes the equipment saleable

Introduction

Mining equipment is advancing toward autonomous and automation technologies to make the site operations more optimized and cost efficient
Sourcing the right equipment at the right time becomes imperative to reduce potential costs and operational costs for day-to-day work at the mine site
The right equipment can vary on a case-by-case basis and hence the final decision could be to buy one of the below
- New Equipment
- Used Equipment

mining-equipment

Sl.No	Channel Type of Procurement	Key Insights
1	Equipment Marketplace	The marketplace model provides a global view of the used equipment available. Further, a seller can decide to add key data pertaining to the equipment. This includes Hours Used Year of Model Condition of Equipment Contact Details Condition of Parts and Attachments with the equipment Other benefits are the EMI facility and insurance availability On the contrary, one of the disadvantages is that the seller may not be able to provide warranty for the equipment
2	Auction	There are certain websites that offer auction facilities for equipment along with resale of used equipment Auctoning of equipment can also help in obtaining the best prices. Further, there are options to participate in the auctions online via Laptop/PC Mobile App While registration for bidding might not involve any expenditure, refundable deposit may have to be deposited as 25-30% of the desired bidding limit Tier 1 service providers offer facilities such as insurance, warranties, shipping, etc. However, these facilities can be availed with additional capital expenditure. The cost is calculated based on your location, condition of the equipment, shipping rates, etc.
3	Used Equipment from OEMs	To drive sales, OEM suppliers have also resorted to selling used mining equipment of their brand after repairing and refurbishing it In general, OEMs have a higher profit margin on selling used mining equipment than new equipment. This is mainly due the customized repair and refurbishment, which makes the equipment saleable However, there are certain advantages in procuring from OEM, listed below Certified Used Equipment Financing Extended Service Options
4	Universal Marketplace	In developing countries such as India and China, OEMs also sell through marketplaces which involve various other industries as well, such as pharmaceuticals, manufacturing durables, etc. They register their country office as the seller or wholesale distributors on the website. Wholesale distributors however have regional limits within the country In this case, a request is posted in the search engine bar or with the individual supplier separately Post this, direct supplier engagement can be carried out without intervention of the marketplace service provider and negotiation can be done on multiple factors such as Size of contract Length of the contract Maintenance and Repair contract The advantage of this model is that equipment from various brands can be compared in a single site. Further, some of them have RFQ options which make the sourcing activity easier Additionally, the websites send details of other prospective sellers whose catalog/page has not been visited by the user Another advantage is that there are no additional charges to be paid by the user

Online Sourcing of Allied Parts

Mining equipment have many parts ranging from OTR tires, track parts, pumps, valves, filters, carriage parts, etc. All of them have a different service life. This could lead to failure of different parts at different time intervals. Hence, preventive and periodical maintenance need to be carried out to optimize the mining operations
If mining companies do not engage with suppliers for full-fledged maintenance contracts, timely sourcing of parts by respective teams on and off mine sites becomes critical
Some of the channels to procure parts are mentioned below

sourcing-parts

Challenges and Shortcomings of Online Sourcing

Though there are many advantages of sourcing online from global vendors, there are certain shortcomings also. For instance, procuring from a different country could involve several risks such as
- Currency exchange risk
- Lead time Risk
- Import–export duty and regulation risk
Currency exchange risk could be allayed by certain measures mentioned below
- Hedging
- Opening of local bank account in country of supply
Lead time risk and regulatory risk need to be assessed before the procurement of mining equipment and parts

Conclusion

Online procurement provides multiple levers of cost savings and negotiations at the capital expenditure level for mining companies
Going forward, the market size in the channel is expected to increase as it provides multiple benefits such as
- Ease of Access
- 24*7 available purchase options
- Global overview of available mining equipment and parts from various levels of the value chain
A blend of online and offline channels would aid in the optimization of sourcing mining equipment