Outsourcing for Mining - a new trend?
Business trends have a way of taking root at different times in different industries. For instance – the banking industry embraced and used computer technology much quicker than the manufacturing company I worked for in 1988. Industries embrace and adopt strategies at different times but typically most industries implement technology and business strategies eventually so they can stay competitive.
Contract manufacturing has been a growing trend in many different industries; Consumer products, food industry, and customer service to name a few. The motivation for this trend is for companies to reduce risks, cut costs and provide focus. For year’s business consultants have been preaching the value of organizations who focus on their “Core Competencies” and financial institutions like commercial banks, insurance companies and investment banking put significant value on reduced risk and return on investment.
The market place rewards companies who are low cost providers and experts in marketing value for their companies. As mentioned above major organizations such as General Mills who once prided themselves on their manufacturing capabilities are quickly divesting themselves of their manufacturing plants and are now placing their focus on developing their brands. I went shopping for grass seed (a real commodity) and found myself amazed at the different brands and options and cost. The seed companies are changing. Lafarge-Holcim now considers themselves experts in creating brands for the commodities they produce.
So the question is – when do we think if and when this trend will find it’s way into the Mining industry? Will companies focus their efforts in developing brands for the commodity and look for ways to reduce risks, cut costs and focus on the marketing efforts of their specific commodity? We believe as Mining Companies consolidate they will be forced to start looking at new ways to be more predictable to shareholders. Outsourcing to reliable and professional organizations will be an area of growth. Creating win/win agreements between the mining companies and service companies will provide opportunities for both organizations to focus, reduce costs and reduce risks.
This business model is being incorporated in the new industry of Frac Sand mining and has worked well through several different business cycles. If this industry can incorporate the outsourcing model then why can’t this model be utilized in the other Mining industries as well?