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Managing Strategic Resource And Operation Case Study Of Rio Tinto And Mine Of The Future

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Question: Describe about Snapshot of Rio Tino,recent history and evolution of the "Mine of the Future" concept and Intersection of strategy, technology and mining of resources heading?     Answer: Introduction:   The report deals with the strategic resource management, practise and its importance in mining industry. The strategic resource and operation management has become one of the vital disciplines in several organizations. The ultimate purpose of managing strategic resource and operation is to help an organization to increase its performance through improved efficiency, effectiveness and flexibility. In these dynamic days, the essence of resource management is essential for running a business, strengthen firm’s competitive position, satisfying its customer’s expectation and achieving the performance targets. The research basically conducted on Rio Tinto, which is a reputed international mining group, headquartered in UK. The primary aim of the study is to provide a clear insight about the review of the tangible assists of the firm and its value chain analysis in order to achieve strategic outcomes with respect to the mining company, Rio Tinto. The study also intends to reflect the number of social and environmental issues that are relies in the heart of sustainable business strategy. I. Snapshot of Rio Tinto: The name Rio Tinto is well known throughout the globe primarily for its exquisite diamond that founds in one of their mining operation in Africa. The company has started its operation in the Great Britten and now it is spread evenly around the world. In mining operation, Rio Tinto is a biggest name and was made its position after their merger with CRA in 1995 (Fisher, 2012). Rio Tinto has been regarded as the one of the most resourceful company and has set their image as extremely powerful international organization in the global market. Major products of the company are copper, gold, diamonds, iron, industrial metals, thermal, uranium and aluminium. Presently the operation of the group has segmented in various countries in the world, for instance, Canada, Europe, Indonesia, South Africa, Mongolia, US, Australia and U. Western Australia is the key region of the company’s portfolio. In this region, the group has 15 iron ore mines, a 1,700 kilometre rail networks, three port facilities and related infrastructure (Rio Tinto Australia, 2015). The developed infrastructure allows Rio to expand in this region significantly. As several mining companies are presence in Australia, Rio has got a golden chance to develop at a rapid pace in recent years. Apart from that, North America (countries such as Canada and US) is also a vital region of the group and it holds for 30% assets of Rio. These regions have a politically stable environment and well-developed infrastructure. It produces copper, coal, borates, ore, diamond and gold. The rest of the company’s assets are located in South America (4%), Africa (6%), Indonesia (1%) and Europe (4%).     Figure 1: Rio Tinto's Graphical Area Distribution   (Source: Australia Mining Review, 2014) Value Chain of Rio Tinto: A value chain analysis is a chain of activities that operates a firm to deliver high quality product or service to its customers. The value chain process in Rio begins with exploration and goes through the several sections with high investment, high risk to get rich natural resources, low profit margin and so on and ultimately focus on refining the extraction of precious metals (for graphical representation of Rio’s value chain procedure, refer to Appendix 1). The margin of the mine tailing recircling is upward moving as it is low risk, enough raw materials are available in the company and no new burdens arise (IBM, 2009). Value creation occurs predominantly in the productive stage of the business. Market forces: Regarding the iron ore market, there is a significant demand especially from the countries like China and India due to their urbanization and industrialization strategy. At the same time, there is an increasing competition between the giant iron ore mines, especially between Fortescue Metals, Rio Tinto and BHP Billion (Rio Tinto Innovation, 2013). Rio Tinto’s “Mine of the Future” programme is the step ahead towards adopting high competition and increasing demand. The group has adopted “Mine of the Future” programme for developing fully autonomous operated mine strategy.  Strategies Rio Tinto seeks to invest and operate in long-term, large and cost competitive mine industries that are not driven by the choice of commodity, rather the quality of opportunities (Rio Tinto Iron Ore Pilbara, 2015). With this policy, the group wants to work in an ethical and social responsible manner to enhance social wellbeing, sustainable development and economic prosperity within their strong governance system.     II. Recent history and evolution of the “Mine of the Future” concept: Recently, Rio Tinto has started an innovative program, namely ‘Mine of the future’, which mainly focuses on creating extraordinary levels of automation and remote the operation in the mining industry. The strategic intent of the program is to revolutionise new way of mining that has not been attempt in the past centuries. The program was started on 18 December 2008 and aimed to reduce the carbon footprint in order to provide greater efficiency and improved management at lowest cost (Fisher, 2012). Rio Tinto believes that, such quality condition will help them to retain and attract superior quality staffs in the competitive labour market. The ‘Mine of the future’ is a foreword looking strategy of Rio group where they are looking beyond their current existence and thinking about the ways through which they can implement better management strategy in future. Grant Thorne, the executive for technology and innovation group of Rio Tinto has said that, they always aims to provide a substantial safety, efficiency and predictability to their workers and the ‘Mine of the future’ program is crucial steps taken ahead by them to satisfy these obligations. The ‘Mine of the future’ project was first launched in 2008. By the April of this year, a mass of robot army were deployed in the Pilbara region of Western Australia to move 100 million tonnes travelled to more that 1 million kilometre. Moving materials by using robot army is one of the key components of Rio’s strategy (Engineers Australia, 2015). It is effective to reduce cost, increase efficiency, improve health, safety and environmental efficiency.  The program is all about emphasised on finding most advanced ways to extract minerals from the deep mine within the earth and thereby reduce environmental impacts. With the strategy of ‘Mine of the future’, Rio Tinto has successfully met the expectation of various customers from emerging developed countries around the globe.     Rio Tinto seeks to become global mining leader by achieving and maintaining sectoral leadership in terms of operational excellence, innovation, sustainable development and innovation. The group has successfully carried out its operations in the global scale by meeting and satisfying the needs of their customers in various section of the world. In the recent years, they have “the way we work” approach in order to achieve economic prosperity, social wellbeing, improved government system and sustainable development (Australia Mining Review, 2014). In order to manage their business in the international market, Rio follows some basic principle in their operation and they are maintaining internal performance with external drivers, realistic achievements with sustainable stretch, including corporate value to maximise shareholder’s return and transparency in their operation management. They believe that all kinds of injuries and incidents are preventable. They have created an environment where all employees have sufficient knowledge and desire to work safely and can go their home at the end of the day. Implementation of the safety programmes in their operational process currently being rolled out with a particular focus to achieve global supply chain management. Another aspect in their operational strategy is positive financial delivery (Itnews for Australian Business, 2015). Majority of the Rio’s assets provides positive return in respect to other mining industries. Rio has achieved this through constant delivery of the business improvement programs, application of the latest technology and investment assets in the lifecycle.   Rio Tinto’s workforce is one of the crucial strategic resources that the company manage properly to establish its position in the global market. Rio believes that, attracting, developing and retaining the skilled employees is critical to improve business performance. An integrated talent sourcing, total reward architecture etc. are some example that Rio used to optimise the value of its workforce. The company joined with international rail specialists to implement world’s first long deployment of haul less driver train (McGagh, 2012). Under the “Mine of the Future” program, Rio first started to test autonomous trucks and drillers. It also established remote operation centre at Perth to manage operation at Pilbara mines which is 1,500 kilometre away. The company also signed with Komatsu for 150 autonomous car deployments. Within 2014, Rio has deployed autonomous drilling system (ADS) and autonomous haulage system (AHS) trucks in their three mine site and expected to spread out the uses strategically.    Figure 2: Innovation Time line for “Mine of the Future” program   (Source: Garvey, 2013) III. Status of the components of the “Mine of the Future” Iron Ore project: Rio Tinto’s “Mine of the Future” Iron Ore Project is concentrated in the Pilbara region of Western Australia. Rio’s Pilbara operation comprise three shipping terminals at two ports, 13 mines and a rail network spanning around 1,400 kilometre. They export iron ore from their port on Western Australia to Eastern Europe and Asia. The development programme that Rio has adopted to expand global market for their product includes development of new mines and expanding key infrastructure that allow them to transport their product in market. In 2009, their Pilbara operation was accounted for more than 170 million tonnes of their total production (Rio Tinto Sustainable development Report, 2015). It implies that, from the year 2000, Rio has expanded their capacity up to 220 million tonnes per year and this is all because of their Pilbara Iron Ore operation. Now, Rio Tinto has a vision to establish “Mine for the Future” programme to improve the ways of mining via remote and automation. They have chosen Pilbara to fulfil their vision, as this is a part of their current ore extraction mines. The vision of the project was to transform mining into low effects, i.e. mining which has very low-level impact to the environment. It will also improve the health and safety of the workers by using robot technology. Figure 3: Mine of the Future (Source: Rio Tinto, 2006) In the current state of rising demand, competitive pressure, decreasing productivity and skill shortage and scarcity of resources, mining companies are upgrading their operations. The operational excellence is one of the crucial strategies that mining companies are trying to implement for achieving operational efficiency, high operational performance, improved process and cost control. In this context, “Mine of the Future” is an example of operational excellence that Rio executed along with their supply chain management to maximise their shareholder’s value (Rio Tinto, 2006). However, Rio needs to be very cautious about the negative environmental impacts that it imposes on its stakeholders, especially on the customers and local communities by ignoring their rights and interests.  Now a days, mining companies are trying to get benefit from integration and coordination of all supply chain activities flawless process. The supply chain activity includes everything, from product development to production, sourcing, logistics as well as marketing. Effective supply chain management is likely to fulfil Rio’s strategic intent, for example, production at a right cost via high performing leans, maximizing portfolio via supply chain capabilities and value driven growth via supply chain synergies. “Mine of the Future” is the innovative execution of mining process that emphasis on end-to-end information technologies and cutting-edge technology to extract iron ore and minerals deep within the earth while reducing the environmental impacts. The four major component of “Mine of the Future” programme are Automated Drilling System (ADS), Autonomous Haulage System (AHS), Driverless Train System (DTS) and Operation centre (Rio Tinto Marine, 2015). Figure 4: Components of “Mine of the Future” program (Source: Rio Tinto Marine, 2015) The Operation centre (OC) or Perth control centre has the facilities that enable Rio to operate all the mines, rail systems and ports from a single location. It receives a wide amount of data from various sources including mine site based CCTV cameras and voice mobile radio channels that facilitates the production and transportation system to be monitored by OC.   More than 400 operators are employed to manage the entire Pilbara iron ore network. OC uses a especial software that analyse the complex data set and creates a user-friendly 3D display of mine that helps the supervisor and controller to form an interaction with the mine activities. OC is not only important to flow information into Iron Ore supply chain, but also crucial to provide scalability to the company through big data analysis. Mine site based operational activities includes loading and haulage, drilling and blasting, process and wash plants, processing and stockpiling etc. At the mine site, each fleet constitutes trucks and loader units. Currently, there are 53 AHS trucks to move high-grade ore to the load-out sites and processing sites. Each AHS truck is capable to carrying 295 tonnes per load. These trucks are equipped with high-precisions GPS, radars, obstacle detection system and wireless network communication. The radars helps to move the truck quickly and safely whereas the obstacle detection system helps to reduce the speeds if required. These trucks send information to OC and in turn receive information from OC regarding the speed and target course. According to McGagh (2012), the AHS trucks extended the tyre life, enhanced the haul cycle time, lowered maintenance cost and reduced fuel uses.  These benefits suggest that, AHS trucks not enhanced the overall productivity, but also it reduced some environmental and social issues.  Rio Tinto operates three autonomous drills at the Pilbara mine site. The automated blast-hole drill system enable an operator to operate multiple drilling by using a single console at a particular location. Human operator will control the first drilling and gradually the control will move to the OC in Perth. The ADS reduce the health and safety concerns of the workers and improve efficiency in blasting and drilling operations. It improve the recovery of the ore body by reducing the amount of waste, more predictable and consistent outcomes from blasting and provides more productive workforce as a result of remote control operations.  Port based operational activities comprises the rail networks that transforms the Iron Ore from mine site to ship-loading, car-dumping and stockpiling for export. They have used Driverless Train System as a substitute of existing train system in which each train drawn out over 3 kilometres in length (YouTube, 2015). The loading capacity of these trains is same as the 250 cars. It enhanced the iron ore carrying capacity and improved the environmental impacts through greater flexibility in train scheduling, reducing delivery cycle time, lowering the energy costs, removal of driver change overtime and reduction in the carbon dioxide emission for each unit of iron ore production. It expected to complete their driverless project within 2015.  For the development of remote control rock breaker, remote shipping loading and run-of-mine bin for ore processing, Rio is now working with Commonwealth Scientific and Industrial Research Organization (CSIRO). Similarly, the teleportation of the loading process enables the operators to work beyond the line-of-sight with video image and access the additional sensors to observe the production process. Another developing project of Rio under “Mine of the Future” program is Excellence centre and Peak-float. Excellence centre allow the team member to enhance productivity, take better decision, recue cost by virtual collaboration with the experts of the organization and access real time data from the operation. On the other hand, Peak-float is high performing computer program that float condition to ensure maximum mineral recovery (Rio Tinto Sustainable development Report, 2015). Before “Mine of the Future” program, Rio Tinto has been using an incremental innovation procedure along the life cycle of their business, such as developing first and second phase of the Pilbara mine operation. However, since 2008, it has undertaken the “Mine of the Future” program to bring a change in their innovation strategy and make it significantly different from their as usual business process. The initial observation of “Mine of the Future” program suggests that, Rio Tinto has initiated the program on the basis of their strong innovation capabilities and financial resources. They believe that, “Mine of the Future” project will provide them a sustainable competitive advantage as well as help them to deliver superior value to the stakeholders. According to the official website of Rio Tinto, the values that Rio offers to the stakeholders includes enhancing safety to their workers, reducing cost to shareholders, eliminating waste and improve overall equipment effectiveness, reducing the environmental impacts to the community where they works and improve quality of the product and dependability of the customers (YouTube, 2015). Rio has underlined a strong commitment to deliver its shareholder’s value and maintaining capital discipline. The world class portfolio of their high quality assets help them to maintain a strong EBIT margin and are in a well positioned to generate free cash flow. However, from the supply chain management aspect it can be said that, “Mine of the Future” program of Rio completely focuses on producing and delivering high quality product but fails to provide emphasis on the supplier and customer level performance.    The non- financial matrix of production process includes quality of the product, production cost, delivery of flexibility and reliability, the speed of delivery and so on (Rio Tinto, 2006). The “Mine of the Future” program has successfully contributes in the aspect of speed of delivery, cost and quality of production and delivery reliability. In this context, the Relational View (RV) can be discussed.
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