1. Did it make sense to start the project by looking at supplier invoices?

2. Did the choice of three sites over a four-month summer period represent a reasonable sample?

3. What are the concerns raised in the case? For each concern, what additional information would be helpful?

Case 4-1 Qmont Mining Alice Winter, working on a summer internship at Qmont student in logistics, to work as a summer intern to assist Mining, was trying to determine how the supply systems him. Harry had said to Alice: A good project for you to for remote locations could be improved. work on is the way we handle supply for remote locations. I suspect that we could do substantially better, but I really QMONT MINING don't have any hard data." Qmont Mining, a major metals producer with headquarters REMOTE LOCATIONS in Vancouver, British Columbia, had extensive holdings all over the Canadian North. Supply management had been Alice found out that Qmont had 17 remote locations, ranging completely decentralized until very recently. A consulting from three small mines that had a buyer/storekeeper on site to study had recommended a move to more centralized sup- two mine start-ups, nine exploration sites, and three develop- ply management, including purchasing and logistics. The ment projects with a distance of 5,000 kilometers (km) be- purchasing and stores manager at Qmont's largest mine tween the farthest ones and 300 km between the closest ones. in British Columbia, Harry Davidson, had been asked to Qmont made a distinction between exploration sites where pursue this idea and to make recommendations on poten- tial improvements.Harry had hired Alice Winter, a college '1 km = 0.60 miles. Chapter 4 Supply Processes and Technology 109 the potential for ore was totally unproven to development addition, it was common for remote site personnel to con- sites where the possibility of mineralization had been proved, tact suppliers directly and place orders. Moreover, when a but where the extent of mineralization had to be determined. drill needed a quick replacement part, apparently it was not Omont used its own drilling crews at these two types of sites, unusual to place orders with several suppliers at the same although most mining companies preferred to use contract time in the hope that at least one would deliver quickly. drillers. Qmont managers believed that for security, availabil- Drill and crew downtime was seen as very expensive. ity, and cost reasons they needed full control and in-house The site accounting records showed that the total supply crews. Typically, at both exploration and development sites spend for these three sites totaled about $1,850,000. Of this an engineer or geologist would be in charge. All supplies for total, approximately: these sites would be flown in by bush planes on floats or by $220,000 was for drilling equipment including drill bits helicopters. and rods ACCOUNTING INFORMATION $120,000 for MRO suppliers. $420,000 for air transport covering seven different sup- Alice Winter decided to visit the accounting department at pliers, of which air transport of personnel in and out of Vancouver headquarters first to see what she could learn sites cost about $170,000. about supply in remote locations. She found out that ac- $180,000 for fuel. counting paid all invoices from suppliers who claimed to have supplied a remote location even when no confirma- . $80,000 for food. tion of orders, deliveries, or receipts was available. This Alice uncovered 22 instances of multiple deliveries of occurred in about one-third of all invoices. The accountant explained: "Getting suppliers to provide odd requirements suppliers and 12 instances of multiple deliveries of the same the same item within days to the same site from different in a hurry and to get bush pilots to fly them in is a constant item from the same supplier within a few days. There were hassle. The last thing we want to do is lose the goodwill of 14 instances where the airfreight bill was at least 10 times these suppliers because we don't have our records straight higher than the value of the item transported. and delay payments." DEVELOPMENT AND EXPLORATION NEXT STEPS SITE DATA After several weeks of gathering this information, Alice Alice did get the chance to review the previous year's wondered what her next steps should be. One option would actual supplier invoices for three different sites (one be to gather similar information for all remote sites to get development and two exploration) over a four-month sum- a more complete picture and to extend the time period. mer period. Communication between actual sites and sup- Another would be to get more specific about the details of pliers occurred in two main ways. Since site leaders were each order and each supplier. She knew that she would be in regular contact via satellite with head office personnel meeting with Harry Davidson in a few days to discuss her in exploration or engineering, they frequently asked the progress and findings to date. She also expected Harry to head office contacts to place specific orders for them. In ask her what she believed she should do next