The Development of VMI-Relationships Between Mining Companies and Providers of Operating Resources

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MAGAZINE №3 (80) June 2017


CATEGORY  Industrial companies’ corporate logistics Inventory management Modern concepts and technologies in logistics and SCM


For mining enterprises, the need for spare parts and consumables used in the repair and operation of equipment depends on a number of factors. The influence degree of each of them is not unambiguous and has more probabilistic (stochastic) nature. Therefore, the equipment manufacturers’ recommendations, which are present in the technical documentation, are more general (universal) in nature. In circumstances where it is not possible to determine the actual need for operating resources unambiguously, mining companies are forced to form additional insurance stocks which are necessary to ensure an uninterrupted production process and maintain productivity at a given level. To reduce the negative impact of uncertainty of the environment, it is advisable to build relationships with suppliers based on VMI technology. The calculations were made taking into account the total costs associated with the organization of orders and supplies from suppliers and consumers. The proposed solutions were based on using the model of the optimal order size in supply chain, taking into account losses, both from immobilization of financial resources diverted to inventories, and from downtime of technological equipment. In the article the list of items of expenses that should be taken into account when calculating the total costs associated with purchases and stocks of operating resources of mining companies is proposed. As a result of calculations, it is shown that with the development of VMI relations between mining companies and their suppliers, it is possible to achieve a mutual cost reduction, while reducing inventory levels, by increasing transparency and certainty when planning the demand.

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