The document discusses how implementing an Enterprise Resource Planning (ERP) system can provide a return on investment for mining companies. It describes how an ERP system can improve outbound and inbound demand planning, labor management and scheduling, provide real-time knowledge, and increase accountable management. Specific benefits mentioned include better inventory management, automated purchase order generation, preventative maintenance scheduling, real-time reporting, and project cost accounting. The document argues that properly selecting, implementing, and customizing an ERP system to a mining company's needs is key to realizing these returns.

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Pronto Solutions Alliance Inc.
(PSA) helps business clients
reach and exceed their potential
through implementation
of Enterprise Resource Planning
software. We are the leading
North American reseller of
award winning Pronto Xi ERP
Business Software.
The importance of Enterprise Resource Planning (ERP) software in the mining industry is
unquestionable. Once simply an accounting transaction engine and a way to collect data for
the production of statutory reports, ERP has evolved into an essential part of the mining
industry, improving decision making, bringing visibility of key indicators to the surface, and
helping businesses improve their bottom line.
This is evident through the industry wide
implementation of software solutions, as well as
market indicators such as the dramatic increase in
demand for experienced ERP professionals. ERP has
become an accepted requirement of mining
companies at any phase in the organizational
development life cycle.
Mining is a diverse industry due to the variety of
minerals produced, geographical locations,
globalization, production methodology and the
varied functions of the organizations. ERP has
evolved to provide endlessly valuable insight into
the business.
An effective use of an ERP, across any of these
disciplines, can have a direct impact upon the
financial well-being of an organization. While an
ERP system may not ultimately turn a company’s
fortunes around, it can, if implemented correctly,
provide a return on investment that will dramatically
improve the performance of an organization as
opposed to one without ERP.
With the influx of ERP packages marketed to the
mining industry, it is difficult for both emerging and
established companies to decide on the most
suitable software package. Emerging organizations
typically may not be exposed to industry best
practices; while established companies may have a
legacy of an existing selection process based on
personal preference and opinion. Regardless,
achieving any kind of return on an outlay for
software is reliant on the following three processes:
 Selection of a suitable ERP package
 Effective implementation
 Ongoing development and alignment of the
ERP to the business
Each of these processes requires significant
planning and discussion. Prior to implementation of
any process, it is important to understand the return
on investment (ROI) behind the software. Although
this is common practice elsewhere, the ERP industry
does not provide much detail on the return.
While the ROI should be the first criteria the
organization considers, it is often misunderstood as
a measure for ERP’s effectiveness. The business
needs to evaluate whether the ERP will add both
short and long term value to its operations.
Evaluating how an ERP can translate into an ROI is
essential for successfully streamlining and
improving business operations.
Through client opinion, interviews, projects and
industry best practice, ROI for mining organizations
comes from a range of sources that are best broken
down into the following broad categories:
1. Outbound Demand Planning - is managing the
inventory that leaves the warehouse, bound for
internal use; typically, critical spares,
consumables, personal protective equipment
(PPE), and anything used in the ongoing
operation of the mine site.
2. Inbound Demand Planning - procurement and
replenishment process of inventory coming into
the mine’s warehouse.
3. Labor Management and Scheduling -
managing labor head count and efficiency to
maximize downtime and cost.
4. Real Time Knowledge - gathering accurate
information quickly is critical to the decision
making process and improving the business.
5. Accountable Management – understanding
the remote nature of mining, having an
accountable management of the operation is
essential to meeting targets.
Outbound Demand Planning
The internal use of inventory is a major component
driving costs - primarily from the large quantity of
supplies and materials held in mine warehouses.
Managing how a mine allocates and commits the
inventory is critical for effectively running the plant
and fleet associated with the mine. Despite the
advances in technology, a number of mining
organizations still monitor inventory requests and
allocations using a “paper-based” or “honour”
system. Implementing an efficient inventory control
system, allows mines a greater understanding of
their real usage.
Translating ERP into ROI
for Mining Companies

2. Page 2 of 4
Given the significant values of the inventory held, and issues facing most
mining warehouses, building a seamless and logical process for tracking
internal inventory is essential for g the financial health of an organization.
A best practice life cycle is summarized below, with each step of the
process contributing to the overall improvement of the ROI:
1. Departments who have a reliance on store inventory (Environmental,
Maintenance, Mobile Maintenance, Construction/Capital
Development, Geology, Drilling, Blasting) should request materials
on a picking slip request. The request should include the inventory
item required, where the item will be used, a piece of equipment, a
General Ledger (GL) code, a capital project, etc. This immediately
recognizes that there is a demand for the specified inventory to allow
the Supply Chain department to plan for its replenishment and issue.
2. Picking slip requests should go through an internal approval process
which allows the organization to prevent over commitment of
inventory items and minimize any abuse of inventory.
3. Once the picking slip request is approved and categorized as such,
the warehouse is notified of the demand for inventory. The
Procurement department can use this approval to separate actual
demand from potential demand.
4. Inventory is set aside for future use, and marked as committed. The
Purchasing department is notified, and accountants know what
accruals may be necessary.
5. Once the item is delivered/picked up, the inventory is updated to
note it is no longer in the store, and the necessary costing posted to
the GL immediately for accurate inventory on hand and financial
standing reporting. The implementation of this process can only be
achieved through ERP. There is a distinct relationship between
managing the amount of inventory used to reducing the outward
flow of cash and eliminating the abuse of inventory.
Inbound Demand Planning
The second step in the process of demand planning is fulfilling all the
necessary internal demands by going to an external vendor and procuring
the requirements. It is essential that the replenishment process is swiftly
carried out to make use of assisted purchasing quantities and automatic
order creation. Mines can use an ERP system to not only help understand
how much to order, but also to determine why a certain quantity has been
suggested. Downtime related to supply chain inefficiency is significantly
reduced in all of the subject user group operations, because the ERP
system is being used to help handle the demands of procurement.
Inventory catalogs can range from 15,000 to 100,000 line items from
thousands of vendors. The time it would take to accurately analyze this
information manually would significantly delay supply chain processes. In
addition to the huge amounts of data, this type of information has the
ability to change at a moment’s notice if there is an urgent requirement
to fix a critically broken piece of equipment or carry out additional
shutdown maintenance. The implementation of the ERP software allows
the mine to react quickly to such changes in demand and recalculate
suggested order quantities and prices, improving the supply chain
process. Each change to the ERP’s data flows through to the
replenishment calculations so that ordering is up to the minute.
Calculating replenishment requirements includes a number of factors:
• Size of shipments
• Speed of shipments
• Supplier average lead time
• Suggested buying quantity for economy reasons such as bulk
discount
• Shipment cost/method
• Minimum/maximum recommended inventory on hand
• Average demand for the inventory item
• Seasonal usage
• Inventory already on order/in transit
Each of these factors allows for the purchase replenishment automation
tool to suggest to the end user the quantity of each item to be ordered,
and the vendor to be used for the replenishment of the items. In doing
so, an inventory catalog of thousands of reorder items can be suggested,
modified and approved, and loaded into bulk purchase orders in a matter
of hours.
Direct financial benefits for streamlining:
• Force users into ordering based on standardized rules on demand
and lead times.
• Order inventory so that required items are readily available to keep
the mine operating.
• Replenish critical spares so that production is not halted.
• Keep artisanal labor busy with required materials to prevent labor
downtime.
• Allow the Procurement staff to spend less time managing the entry
of orders, and more time managing the performance of vendors.
A typical process for the replenishment of inventory in a structured ERP
environment:
1. Parameters are set up at the time of implementation, suitable to the
mine site’s replenishment road map. All mine sites are different,
especially if a mine site location is in a remote area, out of range of
the expedited supply chain. These parameters set out the guidelines
for the system to automatically generate purchase order demand.
2. A regular replenishment report is processed, which can be run with
defined parameters for any dynamic requirements, such as ordering

3. Translating ERP into ROI for Mining Companies PRONTO SOLUTIONS ALLIANCE INC.
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items that are at critical levels of inventory, ordering based on
shipment method, or changing the types of items ordered. Running
this process on a regular daily or weekly basis allows demand to be
picked up as it arises.
3. Orders are consolidated by supplier, and modifications to system
suggestions can be made as needed. This is essential if the price is
not as important as the lead time, or based on supplier availability.
4. Orders are placed electronically to expedite order placement. This
saves significant time in not only the supplier commencing to ship
the order, but also minimizes handling time and reduces the need
for oversized procurement teams.
Labor Management and Scheduling – From a Maintenance
Perspective
A key for mine operations, especially those working on a fly-in and fly-
out basis, is determining adequate staffing levels. Not only is this relevant
from a cost perspective, but also to satisfy the need to keep a plant
running with no downtime. Generating a preventative maintenance plan,
including all labor types and estimated job times, allows a mine to
forecast their short and long term commitment to labor identifying
existing shortfalls and surpluses. Such planning helps mine sites manage
their labor, and assists maintenance departments in forecasting,
budgeting and accurate reporting to finance users.
The process of managing labor starts with understanding what is actually
required of the labor force. A Plant Maintenance department is
responsible for the preventative and retrospective maintenance and
repairs for the mine site’s fleet of mobile and fixed plants. Visualizing the
work load of a maintenance team is next to impossible without an ERP
package. Typically, an ERP implementation will house:
 Plant items to be maintained
 Required PM Tasks / scheduled jobs
 Labor types
 Condition monitoring (monitoring point integration for meters and
gauges)
Mapping out the entire plant structure provides the visibility over all of
the equipment that is required to be maintained for the ongoing
operation of the mine. If maintenance is neglected, this directly impacts
the ability of a mine to haul, or process ore. In order to ensure production
is not impeded due to a lack of preventative maintenance, the ERP
software allows maintenance departments to schedule work at the level
of each employee and be aware of:
• Periods of time where employees are under / over utilized
• Equipment that is due for service
• Documented cases of machine failure to improve the reliability of
the fleet
• Trend analysis on where the plant can be improved
Without an ERP, there is no accountability on the maintenance
department to keep up with the demands of running a plant without fail,
and more importantly, the information is not accessible by the other
departments of the organization. It is absolutely essential that the
maintenance information is visible to other departments to minimize risk
on equipment that is occupationally unsafe and prone to downtime, and
to review any inventory items needed for purchasing, forecasting, and
running a costing analysis. ERP ensures transparency and accountability,
providing the Maintenance department with the necessary tools to keep
mine sites running at optimum performance and identify shortfalls in
their maintenance plan before they arise.
A halt to production is likely to be more dangerous to the bottom line
than cost saving, so it is essential to consider maintenance as part of the
ROI plan for an ERP system.
Real Time Knowledge
One of the most significant changes to ERP systems in the last ten years
has been the ability to transform a transaction engine into a reporting
tool. An integrated Business Intelligence (BI) solution provides users with
real time information anywhere in the world from any internet accessible
device. The reporting tool has helped managers working offsite, without
a connection to their ERP, make decisions and understand the key
performance indicators of the organization. An integrated BI tool is
becoming a foundation level must-have for all clients.
By providing real time information, an intelligent ERP system generates
the necessary insight needed to operate on a dynamic basis. Such
knowledge can be obtained through a number of ways:
• Automated alerts that notify specific users of events - A recent
example included a client that needed to see when shipments are
processed through customs to track the availability of incoming
supply chain deliveries to the mine. Through the automated alerts
via third party logistics integration, the client was able to determine
where risks exist for goods that were not meeting delivery deadlines.
• Real Time Reporting Portal - Following the example above, in case
a shipment is delayed, dashboards can be integrated into an ERP
user’s smart device, browser window or ERP pane to provide
complete visibility over what items may not arrive as expected. The
organization can use this data to source critical items locally or
through expedited air freight.
This real time knowledge allows mining companies to operate with
dynamically to meet its requirements. The examples of real time
knowledge benefits are endless. Using real time knowledge to improve
the reaction speed of users makes it easier for companies to prevent high
risk scenarios such as the example above of critical items not reaching
the mine in sufficient time, projects going over budget or time-sensitive
orders that require approval.
Accountable Management
Navigating the development of a mining organization’s life cycle can be
difficult. A well-planned ERP software implementation can evolve with the
mine, providing management accountability throughout the mine’s
progression. Costs can accumulate in different ways, especially for a
mining organization, and circumstances like fluctuating commodity price
require companies to see value in all exercises.
Project Costing and GL are two standard ERP modules that integrate to
form a budgeting tool that allows the Finance department to keep
managers at any level accountable for the accumulation of cost. Being
able to see costs at the level of a specific project, or at the level of a

4. Translating ERP into ROI for Mining Companies PRONTO SOLUTIONS ALLIANCE INC.
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About the Author
Jarrad Sonnenberg
Manager, Business Development & Advisory
jsonnenberg@psainc.ca
Jarrad Sonnenberg has over 10 years of global experience in
implementing and supporting ERP software in the mining industry.
Jarrad specializes in financial management and business process
improvement for resource exploration companies ranging from
operational mines to acquired companies that produce a wide
variety of minerals including Copper, Iron Ore, Manganese and
Gold.
department cost center, has become key in knowing where budget
variances exist and who is responsible. This driver is the underlining
strength of an ERP system.
It is simply not effective enough to manage budget on a monthly period
at the level of a GL code. This means that a Trial Balance is not an effective
tool for promoting accountability among the organization’s managers;
using an ERP allows CFO’s to budget at any level.
A great example is the Construction (Work) in Progress balance we find
for mining organizations in the process of capitalizing development.
Typically, the GL would summarize this into one line, but by linking the
GL to a Project Costing ledger, it is possible then to break that one line
into projects for each construction project and then even break each one
of those projects into phases. By doing so, the ERP can be set up to mirror
the organizational responsibility structure so that project managers
oversee each of their projects at a suitable level and can be made
accountable for their budgets. It is essential that such integration exists
in the administrative function of the mining industry so that employees
can be given a chance to succeed. This also provides CFOs faith that their
management is operating in a uniform manner when it comes to budget
management.
Other Considerations
Customization
Organizations should embrace customization as it is a continual
investment into the ERP software. It is rare that software can satisfy 100%
of the organization’s needs. The proper methodology would be to
perform a cost benefit analysis to determine the overall benefit of
customizing the software. The right modifications can add significant
value to the effectiveness of the ERP system. A common example seen in
the ERP industry is the need to integrate to 3rd party vendors like
shipping companies. The same evaluation process, performed at the time
of implementing and selecting an ERP solution, should be applied to
customization projects to ensure the same value is added at each step of
an ERP development life cycle. Whether a differentiation exists due to a
geographic location or a mining methodology, it is common for
organizations to customize their ERP to ensure its full functionality.
User buy-in
Involving multiple segments of the business in the selection and
deployment of the ERP is necessary for ensuring a successful
implementation and in maximizing ROI. There is a common
misconception that ERP software falls into the management of
Information Technology (IT), which can be problematic unless the IT
personnel have ERP exposure. ERP implementation and selection is most
effective when all major business units are able to contribute. As
discussed earlier, ROI is achieved in all major departments of business,
including Supply Chain, Maintenance and Finance, and as a result each
should be equally represented in the selection. If an ERP package does
not provide the ability to procure inventory in an efficient manner, then
a full ROI will not be realized. The Supply Chain Manager would be in
best position to analyze whether this is the case or not.
Fraudulent operating environments
A significant number of clients that have discussed the topic of ROI were
concerned with minimizing fraud and improving the fundamental
controls within the business. ERP allows these businesses to set up control
mechanisms to be aware of damaging behavior. An example of this
would be a client that managed to catch an attempt to change a vendor’s
bank details to a fraud based account prior to a large EFT run. Additional
controls include the need to segregate functions like entering an invoice
and paying an invoice or entering a PO and entering an invoice. The
installation of a robust and secure ERP system may have a positive impact
on the bottom line of businesses that are continually experiencing fraud.
Conclusion
The progression of the mining industry coupled with the strength of ERP
software in collecting and managing data volumes makes ERP an
essential tool for business. The evidence supports that ERP has significant
potential in providing ROI, while also providing control and visibility to
unify operations. In an industry where building shareholder value is
critical, it is clear that ERP has become an accepted requirement of mining
companies at any phase in the organizational development life cycle.