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Aurecon 360 Issue 8 - Thinking in action

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Page 36 of 43

LIFT PROFIT THROUGH SUPPLY CHAIN VALUE • Costs exceed what could have been achieved with an optimised supply chain solution • A supply chain that fails to achieve its forecast throughput capacity • Difficulty in managing day to day supply chain operations Currently, there is no regulatory requirement to demonstrate a rigorous and quantifiable approach to optimising the configuration and operating plan of the supply chain to maximise economic benefit. Project fundamentals are commonly shaped at concept stage, based purely on past experience and rule of thumb. As a consequence, it is likely that the set of options to be considered in subsequent project stages will not contain any near-optimal supply chain configurations. "In supply chain projects with a heavy haul rail component, we see this when intuition, or preconceived notions that longer trains are more efficient, form the basis for a choice of what is know as 'consist' length," says Colin Eustace, technical leader for operational optimisation, Aurecon. "Such a choice is often made before the development of any rail infrastructure options and such an arbitrary choice of length can shape all of the options developed, right from concept study inceptions. This approach may lead to exclusion of future near optimal solutions from consideration." 37 Fixing targets may restrict performance Fixing the target throughput at the concept stage is common and often prevents the economic optimisation process from considering optimal solutions. Optimisation of transport supply chain and mine planning should be integrated, so that the optimum mine production profile can be determined, along with the transport supply chain configuration. In some cases, it may be beneficial to reduce mine production by a small percentage (e.g. targeting a higher grade product) if it means avoiding a step change in supply chain capital cost. "Using intuition to shape projects at concept stage is understandable to an extent. The decision space is vast, with many variables involved in complex relationships," comments Colin. "Even for one given solution, it is difficult to forecast system performance in terms of throughput and cycle times." Applying intuition and preconceived ideas provides a means of narrowing down the decision space to a manageable size, but usually at the expense of even considering options that may represent significantlybetter value. Using the illustration of a greenfield bulk supply chain involving heavy haul rail and a bulk port, this discussion provides an overview of a framework to develop a comprehensive quantitative evaluation of the decision space for major supply chain projects. It also includes an argument demonstrating that optimality in terms of economic benefit Aurecon Thinking in action

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