The Impact of a Strong Local Supply Chain on Regional Economic Impacts of Mining

"While mines generally focus on achieving operational efficiency, creating shared value for all stakeholders is also a management goal. This includes taking a holistic view of their supply chains and increasing local participation. This paper examines the role of supply chain management in mine management; in particular the effect of a strong local supply chain on regional economic impacts. Using input-output analysis, the impact of a local supply chain on a mining sector’s regional economic impact is examined by increasing local sourcing (increasing local purchase percentage -- LPP) for 10 key commodities. An approach, based on multipliers and excess local capacity is used to identify key commodities. The impacts examined are sales, employment, labor income, and value added. The work is illustrated with stone mining and quarrying in Missouri. Ten percent increases in LPP of the key commodities, in this example, result in $4.1 million additional impact on the Missouri economy. This work can provide insight on how to better create shared value for all stakeholders. INTRODUCTION Little research has been published on improving mine supply chain management (SCM) to enhance regional economic impacts. Although some extensive academic research has explored the importance of an industries’ supply chain, not much is known about how a locally-based supply chain increases shared value in the resource sector. Across industries, traditional SCM is getting more and more complex. This is true of the mining sector as well. However, this increased sophistication is not directed towards increasing shared value for all stakeholders, particularly, the local communities. Further research is required to develop new SCM strategies that enhance local participation. One major point of difference between this work and traditional supply chain management is the inclusion of stakeholders’ shared value as a goal in SCM. Creating shared value has become a business goal in recent years (Porter and Kramer, 2011). The authors use input-output analysis (Leeuw, 2012) to evaluate the regional economic impacts of supply chain decisions, which is not part of traditional SCM. Although input-output analysis has been applied to SCM for decades, most of the research uses input-output analysis as a tool to advance an industries’ own operational efficiency (Accenture, 2014)."