World-Class Supplier Programme in Chile

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Mineral resources are a form of natural capital that, when transformed into investments in human resources, infrastructure and diversified forms of economic activities, can catalyse longterm
sustainable development. Over the past two decades, ICMM has encouraged member companies to increasingly work with local
stakeholders to integrate their operational activities into local
development plans. At the most basic level, these partnerships capitalise on the core competencies of different sectors in society – government, companies, civil society – to achieve progress on social and environmental issues.

The World-Class Supplier Programme in Chile was launched by BHP Billiton in 2009 and joined by Codelco in 2010. Its aim is to create a more sophisticated and export-driven economy in Chile, whilst creating operational efficiencies and cost-savings for the mining industry. This initiative demonstrates how engaging local stakeholders can realise shared benefits for mining companies and wider society. ICMM aims to support companies engaging in such partnerships to ensure that local and national economies benefit from mining.

The World-Class Suppliers Programme is an innovative solution to operational and environmental challenges experienced by BHP Billiton’s copper business in Chile. Initiated in 2008 – at a time of rising industry costs, increased water scarcity in the Atacama Desert and a growing shortage of local skilled labour – the programme has successfully introduced standardisation across operations and is continuing to develop the knowledge-intensive expertise of local suppliers. This latter outcome is further serving to reduce Chile’s economic vulnerability to commodity market shocks. The success of the programme saw it adopted by Codelco, the Chilean state copper producer, in 2010.

This mutually beneficial programme is ultimately working to create 250 world-class mining suppliers in Chile by 2020. Focusing on five areas (water, energy, HSEC [health, safety, environment and community], human capital and operational efficiency) BHP Billiton is successfully maximising its access to skilled workers, while also supporting economic development locally.

Methodology

As a starting point, the programme seeks tenders from local suppliers on problems or challenges, rather than prescribed solutions, identified at the operational level. A framework is then used to test ideas in real-time. This process is particularly innovative as it runs counter to traditional procurement practices. That is, the obtaining of the most affordable goods and services in the most efficient and reliable basis. A change requiring the close collaboration of both production and procurement teams at BHP Billiton.

To maximise the potential of the programme BHP Billiton is partnering with the government of Chile and Fondacion Chile (a public-private partnership that promotes innovation) to better leverage support for the new suppliers. In the first three years of the programme over 100 innovation projects were submitted for consideration, 20 of which led to contracts with BHP Billiton.

Outcomes

As of December 2012, 36 suppliers, employing more than 5,000 people, were working on projects. These initial projects also led to an estimated US$121 million in cost savings at BHP Billiton. One project involving Tesra and their technology partner Sixth Sense Processware successfully electricity consumption per tonne of copper by two per cent through an automatic scanning system detecting shorts and helping operators fix them in Spence’s electrowinning plant. A second involving Prodinsa developed a solution that increased the useful life of cables on electromechanical shovels by 40 per cent. With annual sales of US$50 million and 200 employees, Prodinsa is now one of the programme’s largest suppliers, and its exports already account for around 50 per cent of its sales.

Beyond financial benefits, the World-Class Supplier Programme also offers mentoring support to companies. Power Train Technologies (PTT), for example, have been able to significantly improve their health and safety standards, and work towards government certification as a research and development centre following as a result of the programme.

The scheme continues to scale up, with its success drawing interest from other companies and suppliers in neighbouring countries. At present, similar initiatives are being considered in Peru, Colombia and Mexico.