Case Study 5: Penoles
An Alliance That Is Worth Its Weight in Silver
For 20 years, Grupo Peñoles has turned to HP, on one hand to have the industry-leader as a technical ally and, on the other hand, to reduce costs and enhance processes. Currently, all the Company's concerns have been transformed into leadership opportunities.
When Grupo Peñoles, global leader in silver production, considered the fact of reducing production costs, the thought did not take long to transform into action. With a relationship of more than 20 years, Peñoles and HP have jointly worked to maintain the Mexican mining giant in a technological state-of-art through different computing periods, from the mini-computer era and the first PCs, to the client-server concept and a variety of processes which shaped the technical process control solutions.
But upgrading is a constant and relentless job. This is why Peñoles needed to implement a technological renovation plan, which could allow constant equipment upgrade and operational cost optimization.
The need to have high-performance servers to optimize processes and costs led the mining company to consider installing the best available microprocessor in their equipment.
With this measure, Peñoles' technical staff performed long evaluations with Alpha processors (development of the ancient Digital) and Sparc (manufactured by Sun Microsystems), as well as with the “antique” 32-bit Intel and the new and powerful Itanium, HP and Intel's most recent development.
A Great Challenge
Peñoles' necessity to find the best price-benefit relationship to choose the perfect technology is not a whim. The fact of maintaining low costs is due to the fact that the international markets control the prices of metals in the mining industry. “There is no way to manage them, the only option we have to compete is reducing operational costs, which has been one of our main strategies. If we do not have a project to optimize our costs, we are dead,” said Mario Antonio Gonzalez Negrete, Peñoles's Computing manager.
For this reason, as a matter of survival, Peñoles must maintain competitive costs in a global level. “During the current recession, we experienced a reduction in metal prices, thus, a lot of mining companies disappeared,” said Gonzalez Negrete. This is a cyclic business; if we do not reach the leadership in cost-optimization, we can disappear, and the key formula to obtain cost-optimization is the technological innovation.”
The challenge of HP was enormous in order to support an enterprise that cannot hesitate on its decisions. HP not only had to help reducing costs, but also had to develop a process for the equipment's good operation in critical conditions, as extraction mines and the adverse environment in which they operate.
“The reliability of the equipment in difficult underground circumstances, where dust and meteorological conditions are extreme, was another factor in our election,” said Francisco Javier Rabago Garcia, inner consultant of this mining enterprise. “We tried other equipment, but all of them failed. HP's equipment is the only one that proved being resistant enough.”
With such premises, one of the first steps taken to help Peñoles was the establishment of an equipment upgrade program. “The renovation of the equipment each two or three years allow us to deploy state-of-art technology all the time,” said Mario Antonio Gonzalez Negrete. "The Company's upgrade with an attractive profitability plan means a lot to us. Besides the fact of seeking all technical options in the market, we have optimized our equipment, support and maintenance costs.”
HP's applications were applied in different areas of the mining enterprise -- from the initial mineral extraction processes on different mines, to management aspects in offices located in all the country. “Being close to an enterprise that supports us and teaches us in all the aspects related to technology, is a strategic and a very important element for our cost optimization project,” said Gonzalez Negrete.
Currently, Peñoles has 2,500 HP personal computers and more than 100 HP servers in all the country, as well as workstations for specific technical solutions.
The King Itanium
As its upgrade challenge, this mining enterprise had as a goal the fact of running management, technical measurement and production control processes, all in the same computer.
In this aspect, the benchmark results were definite. “When given a find command in a 7,200-revolution disk, it took between 40 and 60 seconds to find something with a 32-bit technology. With Itanium, this same research is performed in just three seconds! Another important aspect is that: it is 60% cheaper equipment than the one that the competition offers,” said Pedro Luis Sanchez Armas, Grupo Peñoles' Software Research Manager. Besides its high performance, the king Itanium offers a low cost computing network operation.
“We choose the Itanium technology because it offers us a high development at a low cost,” said Sanchez Armas. “The first ten 4610 Itanium servers are already operating and further equipment is on its way in order to perform a higher quantity of research in our workstation.”
“Having a technologic upgrade agreement with HP allows us to have higher performance technology at a lower cost, where productivity grows with higher capacity and information flow ease of use,” said Sanchez Armas.
“We have always being searchers of new technologies, and we always have been supported by HP in this process. We consider ourselves as pioneers, not because we want to be so, but because we want to be the best. We knew there was a 64- bit technology 8 or 9 years ago, but we believe that this technology has reached its maturing point—not only the hardware, but also the software that has the capacity of leveraging that hardware,” said Sanchez Armas.
Due to the implementation of Itanium microprocessors in 10 of its servers under Linux and HP-UX operating systems, Peñoles performs all the functions it always wanted to perform, “but we are looking forward to obtaining more through the software that will be developing for this processor, and I believe that we will soon obtain it,” proudly said Gonzalez Negrete.
For Peñoles, the Linux-HP combination was considered as a productivity detonator. With Linux, the company already celebrated four years developing its own firewalls, as well as its mails and web services.
The plan is to integrate Itanium into all the solutions and thus reduce even more IT and process costs, integrating the applications on a single type of processor.
Working in Tough Conditions
HP's equipment is deployed in difficult access places, i.e. mining units, to perform geology and reserve calculation solutions; in process control, connected with real-time equipment; or in management aspects, including e-business.
The Itanium processor will run all the applications developed by the mining company. One of them is Promin, which will run the preventive and the corrective maintenance of the production facilities and all the new generated aspects.
In order to maintain low costs, all management systems receive maintenance information in order to see the deployment of the equipment (mills, motors, breakers, etc.) and receive direct information of the process control: quantity of material already processed, kilowatts per hour consumed by the facility, etc. All this information is needed in order to have a production support database.
“We have all the information located in one place; this way we have access to what is happening in the extraction and the mineral recuperation processes. Another benefit is that we have reduced the volume of used consumables,” said the Computing manager.
“Where else have we had more positive results?” asked Rabago Garcia, “Definitely in e-business. We are running the security system in order to eliminate the fact of being invaded by people that could enter to the e-business systems. Added to the reliance that we have to the HP's hardware.”
Talking about e-business, Peñoles has two very important selling points. The first one is Quadrem, a market place formed by the most important mining businesses in the world, where machines, equipment, and services are commercialized.
The other one is the creation of a Grupo Bal market place (Industrias Peñoles, Grupo Palacio de Hierro, Grupo Nacional Provincial, Valores Mexicanos Casa de Bolsa y Credito Afianzador), where all providers of all the horizontal lines will be displayed. Currently some products have been catalogued, performing supply agreements with vendors. This will begin during the first quarter of the year 2002.
With these market places, the acquisition cycle getting smaller. “This is the first step,” said Rabago Garcia. “With this, the inventory is reduced and if we have useless equipment, and it can be offered to a provider and sold to those who really need it.”
Through these actions, Peñoles has improved its productivity up to 60%, and also has reduced its production costs. In the acquisition process, for example, all the procedures that were performed in two weeks are currently performed in two days.
This way, Peñoles not only can survive to the metal market changes, but also can lead this sector world-wide through an alliance with HP, which is worth its weigh in silver. The Company will also contribute by maintaining its position as the main producer of this metal in the world.