Mining: simulation brings profitable policy change

Making money mining

How to find growth in a declining market?

Downturns challenge whole sectors, but the effects vary across companies, with much depending on an organization’s actions. One of the largest mining companies in the world successfully met recent industry-wide declines in shipments and revenues with the help of simulation modeling.

To increase profit, the company proposed entering a new market by opening a new potash mine. With 90% of production to be exported, the supply chain and sales strategy would be key to success. It is here that simulation modeling enabled effective planning.

Modeling the supply chain of a mining company

Amalgama and Goldratt created a detailed agent-based model of the supply chain — from mine to customer. The details included ports, facilities, and the vehicles within them, even the weather, strike action and other random events could be considered. These details made it possible to test and forecast accurately.

Simulation model of a mining supply chain

Using the model, the consultants wanted to determine the right supply chain policy to focus on — push, pull, or hybrid. This was done by varying parameters and conducting stress tests to produce output-data for different loads on the system. The analysis of this data indicated that a pull policy with an emphasis on an efficient, high level of service was optimal. Other policies were clearly different.

Supply Chain Sensitivity Simulation Analysis

The data also showed that making the wrong choice could have large financial implications over time. Favoring a push policy over pull, in this case, would lead to losses exceeding $1.2 billion.

The model also made clear many other benefits to using a pull policy, and, as a result, the company followed the consultants’ advice. For the new project, they reversed their traditional push policy in favor of pull.

The additional benefits, and more details, can be found in the case study.

Dr. Alan Barnard, Goldratt CEO, will be detailing how to analyze the current and future constraints within a steel plant at the AnyLogic Conference this April 18-19.