Mining Company To Move $1B In Spending To Procurement Exchange

Fast-moving companies want procurement exchanges to move beyond office supplies. Codelco, the world's largest copper mining company, needs to automate the sourcing and procurement of multimillion-dollar mining machinery that's central to its business. This summer, the mining company, formally known as Corporacion Nacional del Cobre de Chile, will begin moving more than $1 billion in annual spending onto the mining, minerals, and metals exchange Quadrem International Ltd. in Dallas. The move is based on new E-sourcing software from Emptoris Inc.

Codelco, in Santiago, Chile, uses Quadrem's auction- and catalog-based procurement tools. But German Sandoval, Codelco's E-business manager, says the process of buying from catalogs is ill-suited to his business and to the culture of Chile. Quadrem's implementation of Emptoris' ePass sourcing software will let the government-owned company automate its preferred procurement method--issuing requests for proposals and negotiating contracts based on supplier quality and price.

The ePass software, which Quadrem offers under the name Quest, will automate the request-for-quotes and bid-receipt process. It should also help in contract negotiations. Quadrem's integration with Codelco's SAP financials will let the company manage contracts for high-cost strategic goods, such as massive smelting furnaces and mining machinery, by issuing purchase orders directly from SAP. Also, some contract items may be cataloged on Quadrem so they're easier to order. For one-time purchases, Codelco will use Quadrem's proprietary tools to issue an electronic purchase order.

Sandoval says Codelco desperately needs to automate the sourcing process. The company faxes as many as 15,000 RFQs per month to suppliers and processes them manually. Bids are also processed manually. And purchases against contracts are manually entered into the company's SAP financials. "I send RFQs to five suppliers for most items," Sandoval says. "Using the new system, I'll be able to send them to 10 or 20 and pick the best supplier at the best price, and begin to manage procurement in a much more cost-effective way." Sandoval says he expects to move as much as $100 million in spending to the exchange this year and more in coming years. He expects to save millions of dollars annually using the new system.