"Forecast" developed schedule system of operating activities for ERG

"Forecast" developed schedule system of operating and investment activities for the benefit of one of the world's leading groups specializing in production and processing of mineral resources, Eurasian Resources Group (ERG).

Use of a system which cornerstone the financial and production model of the ERG group is will help group in general and to each its enterprise to develop an optimal production and investment program on planning horizon in 10 years. The program will cover such directions as sales plans, productions, repair, implementation of investment projects, consumption of the main Inventories and raw materials. Use of the software product will help the ERG group to balance economic, production and technology indicators of operating and investment activities. In more detail about functionality of a system it is possible to read here.

ERG - one of diversified mining and metallurgical groups in the world with completely integrated enterprises in spheres of production, processing, power, logistics and marketing.

Optimizing perspectives

In 2012 the company implemented a geographic information system (GIS) in the divisions: JSC Aluminium of Kazakhstan, Eurasian Energy Corporation, Shubarkol Komir, "Sokolov Sarbai Mining Production Association". Within this project about 120 specialists are trained: geologists, surveyors, miners. GIS gave the chance to the enterprises of Group in the shortest possible time to receive a set of options of development of mining operations in the short-term medium and long term. These options depend as on production volumes and quality of the extracted mineral, and on costs.

Using GIS, specialists had an opportunity to predict development of mining operations for decades, to have faithful representation of during what period it is the most reasonable to involve the new field in operation or to preserve old. Besides, the geographic information system allowed to make schedules of mining operations, to define the main directions, volumes and quality of the extracted mineral raw materials and also costs for an overburden and production. In turn SSOP "Forecast", according to the director of the department of financial modeling of the Eurasian Group Armand Sabiganov, will allow to determine optimal production volumes, a portfolio of investment projects for all term of activity of the enterprise – to range projects on degree of investment attractiveness and by that to be focused on the most profitable.

The information and analytical project will cover all enterprises of the Eurasian Group in Kazakhstan, i.e. hundreds of production units and the invested objects. At the same time the electronic capacity of SSOP "Forecast" is capable to calculate financial results both for separate economic entity, and for Group in general. By means of the implemented ERG IT tools will be able to carry out several main objectives in the automatic mode. First, sharply to accelerate processing of data: collecting, actually processing, transfer, storage, display and information analysis on indicators of the international, macroeconomic industry statistics and also the internal data necessary for carrying out calculations of model. Secondly, to carry out mathematical calculations for solving of tasks, ERG concerning planning of operating activities.

So far data collection in a system is performed using the web portal on which over ten different forms for filling describing productive and financial activities of the enterprises of Group and also for introduction of certain production, marketing and logistic restrictions are placed. So those parameters, above or below which the company is not recommended to rise or fall. It can be the volume of annual working off of the field recorded by the contract. Or the supply rate of ferroalloy products considered by the consumer agreement. Even capacity of the railway station "Dostyk" on the Kazakhstan-Chinese border is entered to the database as the limiter too. Everything, according to the chief specialist of developer company of SSOP Anna Verkhovskaya, in a system in the form of different restrictions about 50 thousand digital parameters are put. All information which will arrive will undergo the automated multistage approval: from the employee responsible for introduction of data, to key owners of business processes.

Use of SSOP "Forecast" will help ERG to solve a number of strategic and applied problems. So, using the corresponding options of a system at a stage of formation of the consolidated statements it will be possible to reveal inconsistency of data from the enterprises of Group, to quickly find inaccuracies and to eliminate them at data collection. As for formation of an optimal investment portfolio, electronic "oracle" is capable to define forward for about ten years minimum necessary expenses which will be required for receiving the greatest possible profit. And the optimal production plan and the plan of loading of capacities created by a system will help to reveal "narrow" places in production where the investment attraction is necessary. Besides, Forecast will solve also a row operational applied for dachas, such as collecting of primary information from the enterprises, approval of intra group purchases and delivery of products, the analysis of available capacities of the production park, differentiation of responsibility of departments regarding providing data.

We build the plan realistic

In addition to the web portal a system will allow to use alternatives - ny data sources. In particular, SSOP is integrated with the GIS and SAP systems.

Two approaches to planning of production volumes are realized in SSOP "Forecast": "from top to down" (from end products before production) and "from below up" (from production to end products).

The first means calculation of the production program of the "lower" repartitions on the basis of the target sales volume created by marketing services. The second assumes calculation of possible volume of mineral extraction on the basis of the data which are stored in GIS and then on the basis of volumes of production and regulations of consumption of the extracted raw materials by production of finished goods to create the production program for higher repartitions, up to end products.

Thanks to opportunities of the so-called "scenario analysis" users of a system can carry out calculations for any of these techniques. And the block of financial and economic models will transfer physical volumes of extraction and production to indicators of profitability, EBITDA, income and other financial and economic indicators. Due to integration of SSOP "Forecast" into GIS there is possible creation of the optimal production plan deprived of normal disagreements with output plans and marketing. In turn, identification of the notorious "narrow" places interfering accomplishment of marketing tasks can be used during creation of an investment program.

Formation of an optimal investment portfolio from the point of view of all ERG Group, but not its separate structural units is also solved in the Forecast system. At the same time in the course of optimization of investment and production programs as it was already told above, a system considers logistic, marketing, production, budget and other restrictions.

Models and modules

In planning process a system relies on complex approach. For this purpose programmers within SSOP simulate the financial and production model which is rather precisely reflecting all production of ERG in Kazakhstan. This virtual simulator considers restrictions on the current production capacity of each workplace, market capacity of end products, budget restrictions for the investment attraction and some other. Now all segments of the ERG Group will be involved in work on planning thanks to Forecast actually, beginning from each workplace at the enterprises and finishing investment, financial, technical with blocks of management company. In calculation result specialists will create key performance indicators for each plant of a division on the fifth anniversary. Taking into account macroeconomic and financial performance, raw material prices for the enterprises will determine the planned specific cost of end products with a possibility of detailing according to separate articles of unit costs (FOT, resources, administrative expenses).

Successfully to solve problems of optimum control, planned production volume on each of the plants will be determined and the investment program including the most profitable projects is picked up. At the same time a system will estimate not only each investment project, but also complex effect of all investment program.

Use of SSOP "Forecast" will serve also formation of optimal sales plans, productions, consumption of the main materials and raw materials, purchases. Taking into account the acquired information and the existing restrictions on production capacities, budget limits (everything, we will remind, a system considers 50 thousand restrictions) a number of planned forms of the reporting will be prepared (profit and losses, sales on sales markets, capital costs, cash flow). So multidimensional functioning of SSOP, according to Armand Sabiganov, is reached also thanks to modular structure of the information and analytical system consisting of several main specialized segments:

• the module of the data collection designed to accumulate information from the system of SAP, GIS and also the web portal operating at some enterprises ERG;
• the module of check and approval in which the program puts a number of the expert rules allowing to keep track of all inaccuracies allowed by the user when filling a report form and to require their correction. In addition, function of approval of data is provided here, as assigns a certain part of responsibility to each of the departments participating in creation of forecasts. All data sources are integrated in uniform storage;
• the module of monitoring and the analysis in which it is possible to reveal quickly statistical regularities and trends and, respectively, timely to react to the changing conditions (for example, it can be the change in price in raw materials market, the real product demand of the company in other countries, etc.);
• the module of modeling, forecasting and optimization (optimizer) which will give the chance of the company to formulate and solve problems of goals or optimum control. The broad spectrum of methods of the analysis, modeling and forecasting, such as aggregation/disaggregation, trend models, linear/nonlinear regression models, tools of identification of functional dependences and other has the module;
• the visualization module which will present to the end user results of forecasts in the form, usual for it: in diagrams, schemes and tables.