Watch the on-demand replay as industry leaders discuss how to use your investments today to achieve greater business clarity, make smarter decisions and prepare your operations for the move to S/4HANA.
In this webcast replay, industry leaders discuss how to use your investments today to achieve greater business clarity, make smarter decisions and prepare your operations for the move to S/4HANA.
Iain Thompson: Welcome everyone to EY’s ‘Preparing for tomorrow’s mine by transforming and driving better business decisions today’ web seminar.
In today’s seminar, we plan to discuss industry trends and the outlook for what this means for transformation around your ERP systems, navigating strategic projects during COVID-19 and beyond, preparing for global transformation and how to make the most of your investments, optimize your operations, manage risks and strengthen your supply chain.
From an agenda perspective, I’m briefly going to introduce our panellists, and then I will provide a very quick outlook around trends and transformation within the sector. The bulk of today’s discussion is going to be a panel discussion where I’m going to ask the panellists a set of questions and they will share their experiences in the form of responses.
But while we’re going through each of those questions, I encourage you to use the Q&A panel at the bottom right of your screen to post your own questions. If we have time at the end, what we hope to do is go through some of your questions and pose them to our panelists.
On our panel today, first we have Ruediger Schroedter. Rudy has over 20 years experience working with SAP; ten of those years have been in the mining and metal sector. Rudy is SAP’s global lead for metals and mining. He is a thought leader at SAP in digital transformation and the intelligent enterprise, and how to bring these solutions to the mining industry.
We have also on our panel, Philip Yee, the CFO of Eldorado gold. Phil has extensive experience in the mining industry around financial management and reporting, finance and operational recovery, M&A, international risk management and strategy development.
Prior to Eldorado, Phil was the CFO of Kirkland Lake Gold, and then Lake Shore Gold between 2013 and 2016. Phil has also served on the Board of Directors of Kumtor Operating Company, the Eurasia Foundation of Central Asia, and the American Chamber of Commerce in Bishkek.
Last but not least, we have a fellow Partner of mine, Stephanie Porter on the panel. Steph is the EY metals and mining leader for SAP and S4 transformation and migrations. She brings rich experiences around global implementations, tempered localization, solution design and large-scale SAP transformation projects. Steph holds an Honours Business Administration degree from Ivey Business School at Western University.
Before we get started with our panellists, I plan to spend a bit of time just setting the stage for today’s discussion. All of us work in the sector, I think all of us have some history or some context around ERP systems within the sector.
From the late 90s to the early 2000s, for those of us that have been around long enough - probably embarked on our first ERP implementation in the sector, and saw mixed successes around that. I know certainly from my perspective, when I often go and talk to some of the leaders that we have in the sector today, they are quick to remind me of some of the challenges they faced around those early implementations.
Following that, as we look at the sector today, we quite often see very heterogenous ERP landscapes in many of our mining companies, specifically those that have grown quickly through M&A transactions. There is always the discussion and challenge we have around centralization versus decentralization of decision making and how system strategies and operating models are influenced by that dynamic within the sector.
So why now? Why is it a good time to start to think through why perhaps a renewed system strategy is important? If we look at what’s happening in the sector today and what we’re experiencing, there are a number of risks and opportunities that are very apparent — from productivity issues and rising costs, to challenges around license to operate. More recently, the role of high impact risks from tailings dam issues, failures due to the impact of COVID and what COVID meant to the sector in terms of those risks.
The future of work; we're all aware that many of our workforces are aging. In order to get the next generation of talent, how are we going to build an environment that is geared towards the skills that we want to attract to the sector? There is decarbonization and the important role of that within the way we operate. There’s the need to innovate. There are responses to geopolitics, capital agenda, volatility, and what is quite often tied to systems is the need to really digitalize and drive efficiencies in our operations through digital and data.
So under these operating conditions, how does this impact our strategy, are we ready to create value in terms of environmental stewardship and address the environmental impacts and challenges we face today? How do we think through social capital in terms of managing relationships with our communities and key outside parties? Human capital - how do we drive and employ productivity, labor relations and the health and safety of our employees? How do we move towards business model innovation and change the way we are doing things as we look at the way the sector is changing around vertical integration with suppliers for those of us that are producing materials for the emerging and changing energy transition?
And last but not least, there’s leadership and governance. How do we make sure we manage these companies under the current complex environment? Do we have the foundations in place, not only to improve our businesses, but to transform the way we work and potentially disrupt the sector?
So how do we do this? From EY's perspective, where we're going to look at solving some of the challenges we have in our sector and taking advantage of the opportunities, we really need to put humans at the center of what we do in terms of purpose, strategy, and every day business. This is going to help us in the war on talent, help us from a safety perspective and license to operate. We need to have the ability to deliver technology at speed, to quickly be able to respond and transform the way we do things, and finally, we need to be able to innovate at scale.
This is required in order to drive end-to-end supply chain optimization, asset productivity, OEE, market to mine alignment and optimized schedule execution. All of which is going to require a technology platform that is aligned to this agenda, align mining companies to both manage the risks and take advantage of strategic opportunities.
What I'm hoping to do today through our panel is discuss a little bit around how our panellists are seeing mining companies start to plan and execute against this agenda.
Perhaps the best way to start, Steph, is to look at you, and ask you the question. I know you and I are in constant discussions around this. We've noticed probably, from my perspective in the last 18 months, a real renewed interest from many of our mining and metals clients here in Canada and elsewhere, as they start to revisit their ERP strategy and start to look to do more in the space. What do you think is driving this, Steph, from your perspective?
Stephanie Porter: Well, I definitely agree that there's been an uptick of interest lately, I think there is probably three main things that have been driving it. One of the main reasons people embark on this kind of initiative is risk. Either they've got aging legacy systems that are putting their operations at risk, or as you mentioned, they've been growing rapidly through acquisition and now they find themselves with a disparate landscape and they need to find a way to harmonize the organization and put them on one single platform.
Lastly, unreliable data - whether they have data issues that are actually worrisome for the business, or whether they just want to take the opportunity to put themselves in a better position for data-driven decision-making moving forward. That's a big one.
The second big one is around value. Whether it's setting the foundation for a growth agenda that they want to enable or some specific benefits/pain point areas that they want to resolve, or generally speaking, harmonization and trying to drive process improvements across the business. ERP enables all of that kind of change in a really effective way.
The last main reason is the upcoming S4 migration deadline. A lot of organizations are looking to the future and understanding that if they're currently on SAP they may need to migrate to S4 in the near-term future, and they want to start looking at what should be part of that migration? Should it be a transformation? Should they try to get more benefit than just the enhanced functionality out of that kind of transition? So those three key drivers are why we're seeing the big uptick lately.
Iain Thompson: Thanks Steph. And maybe that's a good segue, Rudy, into a question for you. If we look at some of those companies that exist in the market, and these are many of the large-scale companies, so typically very different from some of the mid tiers that maybe looking at what Steph has described.
They've all moved to integrated ERP systems over the last number of years and have really matured in that way. Where do you think these companies, or where have you seen these companies generate the most value from the strategy, and how would these value areas apply to many of our mid size mining companies here in Canada?
Ruediger Schroedter: It is true that most large mining companies are on one platform and defined especially in the mid-tier size companies that they have, through acquisitions, multiple systems as you have mentioned.
The big value driver, in my opinion, is that they can basically deploy harmonized processes, ensuring they have the same data quality across the mine sites, and this typically delivers sense of basis to employ or deploy more advanced technology. May it be predictive analytics or may it be robotics, and those kinds of things which all rely to some extent on ERP data.
If you think that you have multiple ERP systems from different vendors, deploying those technologies across multiple sites gets much harder because you have to adjust all these integrations and data quality issues across multiple sites. This takes much more time. You cannot react very agilely and quickly in deploying technologies if you have to adjust each time, and you basically have to start from scratch to build these technologies into your operations. So, this is a main driver here.
Overall, the less systems you have, the more likely it is that you reduce costs and integrations, you can also see you don't have to support different processes all the time and your centre of excellence can be more centralized. Everyone knows the processes as they are applied across the board in the same way.
Iain Thompson: Thanks, Rudy. Phil, Eldorado has recently embarked on a journey to look at putting in place a roadmap and a strategy. What advice would you give to other mining companies, and perhaps if you think of what Rudy has just responded in terms of the value, what does Eldorado look to get out of its transformation in terms of value?
Philip Yee: Thanks, Iain. Good day, everyone. Eldorado has had an existing ERP system in place for a number of years. With the announced ending of SAP support for some of our older legacy versions, we're undertaking to upgrade our systems and improve our use and effectiveness of those systems across the organization, and to effectively migrate all the locations to S/4HANA. This is a very significant undertaking. I think from our experience so far there is really three main keys to this technology roadmap.
First of all, take the time to plan out the objectives and scope of the project. It's well worth the time investment, and hopefully limits surprises or changes in scope during the project. In our case, we spent nine months last year building our financial systems roadmap. We mapped out the future state of what we wanted with our ERP system. We didn't want to reinvent the wheel, and we wanted to utilize as much of what we already had in place and make the most of our investment so far.
We identified new functionality as well, and new modules that would improve our effectiveness and our efficiencies. We completed technical due diligence to ensure our objectives and expectations were met, and also allowed for future growth of our business. For example, financial consolidation, budgeting, forecasting and improved governance were really key areas of focus in our financial systems roadmap. Spending this much time planning in advance is probably a bit unusual, but I believe it definitely helped to set us up for success.
Secondly, we are highly focused on integration. We have a number of operating sites and we have SAP in place not only at our corporate offices but also across our operating sites. We recognized early that in order to achieve integration we needed to involve all the sites in planning the cohesive roadmap to develop a global finance function. Involving all the sites early and applying process also helped to increase buy in and overall acceptance in the project.
Thirdly, it's important to ensure you have the right resources, identify the right skillsets and make sure they're in place to support the project. Implementing a new ERP system or making changes to an existing ERP system require more than just IT tech resources. It’s important to have resources in place that understand the business side of things in order to map out the finance and business requirements, and ensure the proper processes, controls and compliance requirements are identified and controlled as well.
Iain Thompson: Thanks, Phil. Steph, maybe just to follow on to Phil's discussion because Phil alluded to that planning piece that you were heavily involved in up front with Eldorado. From your perspective in terms of de-risking a project, from your experience, what's the value of that piece compared to other alternatives which might go quite quickly into design?
Stephanie Porter: It’s sort of a new concept over the last five or so years that we've been doing. A lot of organizations were not seeing the value come through in our ERP implementations and/or they were finding a lot of risk, increased cost, etc.
The more we analyzed that, the more we determined that we needed a strong methodology up front, to make sure that the right areas of value were really being identified and the right risks were being brought forward. Anything that generally takes longer discourse and can throw a timeline off track is started earlier, to ensure that we have ample time to get the right resources and governance in place to make the project successful.
We've been talking to a lot of different clients over the last five to ten years about investing in that upfront piece. I agree with Phil; it is endlessly important. Not only to getting a useful business case that's robust and achievable, but that people have bought into a roadmap that's predictable, accurate and helps people understand what is going to go on over the next several years or however long your implementation is.
Also getting the associated buy in and the right resources stood up, and trying to get in front of all the major risk factors that exist on these kinds of programs. It's important, in my mind, to embark on a pre-ERP project for sure.
Iain Thompson: Steph, having spent a lot of time working in the sector with my clients, we always do a lot of planning around the infrastructure investments we make, and if we're going to put capital towards new plans or whatever it is. There is a lot of planning, due diligence, pre-fees and fees that we go into. I think the sector has not been as methodical in terms of capital that they've deployed to systems and sometimes systems require that planning up front, too. So, it's good to see that starting to happen now.
I'm going to change gears a little bit and, Rudy, bring this one back to you, because you talked briefly about the fact that many of these companies have grown through M&A. I know it's not too uncommon in having worked with a number of my clients in the sector where we've helped them integrate assets into their operations, typically the ERP's being left to stand alone.
The justification for that is we don't want to disrupt the operations, the ERP's purpose for the operation, and typically when they inherit these assets, that operation will have its own ERP deployed to manage it.
As this grows over time, as you put it, it is not too uncommon that a mining company might have five or six ERP systems, depending on the number of assets that they have. Is this model sustainable in terms of today's operating environment? I think the biggest question I often get from companies in those situations as they continue to grow, is when is the right time to transition away from that model, and what are your experiences around the different approaches?
Ruediger Schroedter: I don't think it's sustainable. It’s not only that you have the additional cost of maintaining different ERP technologies, different setups of systems, increasing the risk that something is failing, you don't have enough people, or all the maintenance. It also cements different cultures in a company. So, if you acquire a company, and you don't use the same systems or the same processes, you basically run two companies. There is no common culture, and I think this is an issue as well. It imposes a risk, because different company cultures have different risk involved in this, and if you don't harmonize, you put your company at risk.
Looking at what Steph mentioned about the deadline, migrating to S4 and all the digital technologies. This is basically facilitating and accelerating these discussions mining companies have, because they say that their peers are potentially investing in these technologies and they don't want to fall behind. They have an accelerated motive to invest, and to stay competitive here.
When it comes to timing, I think there is nothing really stopping any company now. I think the right time is always now, and if you look at it like this, the earlier the start the better it is. If everyone starts at the same time, you will probably have trouble finding the right resources for your projects and to do all these digital transformation projects, and then you have to be on a wait-list and you may lose a competitive advantage in the end.
Iain Thompson: Thanks, Rudy. Steph, from your perspective, based on what you've seen in terms of heterogenous landscape and the benefit and complexity involved in harmonizing those, what are some of the thoughts you have around the process to get there in terms of preparation and planning?
Stephanie Porter: I agree with Rudy that it's a dangerous situation and it largely speaks to a bigger problem within the organization. A lack of harmonization across business processes, roles and responsibilities, non-standardized data, etc. all culminating in a disparate landscape.
I think moving to a harmonized set of processes with very little deviation, a standard set of data and one common platform is a big transformation; it's a big shift for every organization. That's again why that planning piece up front is so important, because you not only look at what the benefits would be of doing that. You have to also look at how exactly you're going to do that, what is the best way, what's the best sequence, and what's the best clustering approach in order to make that go as seamlessly and smoothly as possible.
You have to bake that into the roadmap so you have some sense of what exactly is going to change in each of the different locations at different points in time, what resources are going to be required in order to bring those changes to light and what costs and benefits are going to be associated with that at different points in time. It’s really all about that roadmapping and planning piece up front, and then sticking to it and executing against it.
Iain Thompson: And I think that in some way – and maybe this is one for you, Phil – is sticking to the plan, right? So we do work in a sector that is cyclical in many natures, and sometimes setting out a five-year roadmap and sticking to it can be challenging in times when commodity prices are looking pretty good now for the most part, but we are going to see ups and downs as we go through it.
What kind of concerns, or what are your thoughts in terms of how do you commit to deliver against that five-year plan given that you're going to see swings in the commodity cycles? Because I often see the plan offset sometimes in the down markets. What are your thoughts there, Phil?
Philip Yee: Well, we put out a five-year plan last year. It was the first time we did that, as part of our 2020 annual guidance. And part of the reason we did that was because we were having some challenges at one of our key operations being our Kışladağ heaping project in Turkey. We encountered some recovery issues which required a lot of additional testing and analysis, but resulted in a significantly decreased mine life.
I think at that time, it made sense to show a longer plan - when we came up with a plan, just putting out guidance for the next year, when you know that the next year is going to be impacted because of these operational issues, wasn't the right solution. Putting out a longer term view was very important to show that there was a recovery plan. So that's the reason we did that, we put out a five-year guidance from a production perspective. Once you do that, it's very difficult to stop doing that.
That was a major commitment last year, and in 2021, when we put out our guidance, we put out a five-year plan again, and it was interesting that our five-year plan in 2021 was slightly improved from our five-year plan in 2020.
To your point of commodity prices, yes, higher commodity prices does help. But we do stress test a lot of our models. We don't necessarily put out all that information, but we do provide it in a lot of our discussions. But definitely, when you put out a five-year plan it is important that you stick to it. If you keep changing it year-over-year, it's going to create integrity issues. It's important to have that market confidence in what you're doing.
I think from an Eldorado perspective, we've had a number of challenges over the last couple years; we’ve delivered on a number of catalysts, and the biggest one is the recent announcements in Greece which are not reflected in our five-year plan. Now that we've got in place a clear path for it, and the projects are de-risked to a certain extent, we will amend that five-year plan. I think it's important that when you put something like that out there, you have to make sure that you have the support, you have the internal buy in from the organization and you really do believe that you can deliver that.
Iain Thompson: Thanks, Phil. And I know the work you're doing on systems is aligned and geared towards executing and supporting that plan. So, thanks for that. I'm going to go back to Rudy on the next one, and then I'll probably ask Phil and Steph too. Rudy, you talked a little bit about different cultures, and you talked a bit around the multiple systems, and quite often when I talk to some of the executives in the companies that are growing quickly, that's sometimes by design. They really want to put out the accountability towards the operations, they want to have the general manager and the operational teams really responsible for their execution.
So if we look at an integrated ERP system, really what we are doing, and I've overly simplified it because there is a lot more to it, but we're creating a common process and a data model across the organization. How does this match with that paradigm that we quite often see in terms of decentralized decision-making and pushing accountability for execution down to the operations?
Ruediger Schroedter: I think decentralization allows a lot of flexibility in decision-making, so I agree with that. But it also comes - especially from a system perspective - with a lot of costs, as mentioned earlier.
I think you can still make decentralized decisions if you have one ERP platform. And then it helps to consolidate data, make better decisions and compare, for example, different mine sites and use this as an input since the data are harmonized. You have deep insights into this so that you know what is going on at the mine sites. You can use this information to make better decisions, and also push the decision-making back to the mine sites, because they can then still make their own decisions.
I think it does not contradict each other that you do have to make centralized decisions if you have a centralized ERP. This decentralization - there is a higher risk for that. You have to consolidate the KPIs and you have to roll out the data from different systems into an analytical platform so that you can really make a decision here. If everyone on there is basically a silo, then they make sub optimal decisions which might be good for a particular mine site or sub company, but may not be good for the entire company.
Iain Thompson: Thanks, Rudy. Phil, as somebody who's worked under these models, what is your perspective on how these paradigms fit together?
Philip Yee: So, at Eldorado, we traditionally operate on a decentralized basis, which allows our site management to make decisions specific to the sites. However, there are areas where it does make sense to create a common platform, and consistency of use across the organization. An integrated ERP system is a good example.
In our case, a lack of integration in the past has created situations where key ERP functionality and processes are different across our jurisdictions. It creates inefficiencies and challenges for financial consolidation and financial reporting.
As Rudy just highlighted, we've had situations where when you focus on corporate KPIs, we get different information coming from sites, from decentralized systems. They're usually accumulated on a manual basis, and then they have to be adjusted at the corporate level to finalize the metrics for reporting. It gets very inefficient, and there is lots of room for error. It is risky, so I think having a consistent integrated system will eliminate a lot of that risk. I think it is going to make it much more effective, as well.
So in our case, where we've had a lot of excessive manual steps and work-arounds, having that integrated ERP system will definitely improve our data integrity. It’s going to allow for smarter decision making, it’s going to save time and it’s going to reduce costs. While at the same time allowing the various sites to continue to make decisions to achieve their objectives and contribute to the corporate objectives as well.
Iain Thompson: Thanks, Phil. Then maybe a different angle on this for you, Steph. I know in some of my recent discussions with clients, there is this concept of driving innovation into the operations. I think through the paradigm of multiple systems versus single systems, and then I look at where the world of these ERP systems are going and how much innovation is being driven by the vendors in terms of, for example, HR mobility apps, or asset management apps or whatever it is.
What is your perspective on the different models in terms of how an integrated system under a decentralized decision-making model may still allow you to push out innovations quicker into the operations? And what have you seen the likes of SAP do in this space?
Stephanie Porter: I think first, on sort of the central, decentral topic, we spend a lot of time up front trying to figure out what makes the most sense for the organization, what they're actually trying to accomplish, and what the cost benefit looks like for those different areas. If you're trying to curtail Maverik's spending for example, you may want to look at centralized procurement and how an ERP can help enable that.
In other areas there may be great efficiencies to centralizing something. In other areas you may want to drive accountability and have some decentralized decision-making as Phil alluded to at the specific sites, in which case you may want to talk about some harmonization of processes or common KPIs that you want to measure folks against. But then identify specific areas in which they can make their own decisions and do something a little bit more localized or a little bit different than the rest of the organization.
The most important thing is just to identify those guardrails, where you want to harmonize and where you don't, and where you want to centralize and where you don't up front and then ensure that you stick to that as you go through the design build, testing and implementation phases of a project. To your point, Iain, around innovation, I think as Rudy alluded to earlier, SAP is often the first step in that journey.
So, making sure that you have a solid foundation of one platform, high quality data, good processes that are generally harmonized throughout the organization. From there, it is much easier to be agile and adopt innovative technologies as they become relevant to your business, block chain, robotics process automation etc., and of course predictive and advanced analytics.
From a mobility standpoint, I think we've seen great strides in the SAP area with our Fiori apps. A lot of our Mining & Metals are interested in getting those rolled out to broader operations - people get pretty excited about that.
Once the broader business is used to the stability of standardized and high quality data, they're used to using some mobile apps, getting more used to having technology be a differentiator and a common part of how they do their job, then it is much easier to roll out more sophisticated things moving forward in your roadmap.
Iain Thompson: Thanks, Steph. So just before I move to the next question, just wanted to remind everyone, if you have questions, go ahead and post those questions. I want to make sure we get to some of those at the end. But maybe if we changed direction a little bit now.
With COVID, we've seen many mining companies look at new ways of remote working. As you can see, many of us are sitting in home offices today. They're looking at strengthening their supply chain around supply chain resilience as certain companies saw challenges emerge initially around the impact of COVID. Then further expanding their focus on license to operate.
Phil, from your perspective, how has COVID shifted priorities for Eldorado, and how best would you suggest we manage this now and also beyond COVID?
Philip Yee: I think employee safety is and has always been a key priority and focus for Eldorado. With the onset of COVID last year, I think the focus on employee health and safety became more front and center. We established a number of new protocols at our various operations as well as even at our corporate offices, focused on situations to prevent and detect COVID cases.
During 2020, all our employees that were designated to be in high risk categories or had family members that were designated to be in high risk categories, were required to stay at home. That had an impact on our workforce. Those employees that could work from home were encouraged to do so. As you said, Iain, remote working has become more the norm for those that can do it effectively.
At the sites, we follow all the required COVID protocols - the mandatory masking, hand washing, physical distancing, etc. We've also implemented new innovative technologies designed to keep people safe. For example, we've introduced contract tracing at all our sites.
Our employees wear ID bracelets, they can scan those at strategically located readers throughout the locations. This allows us to proactively track movements and protect our site personnel. We also conduct ongoing educational sessions for all our employees, so that they can go home and implement similar types of protection measures for their families. And this helps to protect the local communities, as well.
We've donated PPE to local communities and provided assistance in times of need; that’s important from a license to operate perspective. From a supply chain perspective, Eldorado wasn't specifically impacted on the supply chain front through COVID. But we do have constant communication with our key supply chain, suppliers and contractors, and we ensure there is proper communication. If there are areas that we can help them prepare, we do get involved there as well.
Overall, I think we were very successful in managing COVID situations at our various operating locations in 2020, despite localized situations. For example, in Quebec last year there was a two-week mandatory shutdown in March, and other challenges related to COVID in 2020. We're one of the few companies that didn't alter our 2020 production guidance for the year. And we were very pleased to achieve that production guidance last year.
Iain Thompson: Excellent, Phil. And I would say as an observation, I've seen the metals and mining industry do particularly well. Obviously, there are people impacted, and we have to be sensitive to that.
I think by the industry's nature, as you put it, with a real focus around health and safety and community engagement, we were set up well in terms of our ability as a sector to respond and continue to operate. The fact that we were deemed essential services for the most part in many areas meant that we could put in place the right practices and continue to operate safely.
Rudy, for you, as you look at new ways of working in a sense, and I'm engaged in a number of ways with mining companies at the moment where we're looking at putting in place remote operating centers, where we're looking at bringing planning functions into off-site roles, at least for some of the mid to long range planning perspectives.
And then there is the whole short interval control around remote centers, and the execution pieces that fit into that. What have you seen from your clients in terms of SAP, the roles you're playing, the new ways of working to some of your clients and the impact COVID has had, or the acceleration that COVID has created for you?
Ruediger Schroedter: Well, I think the most obvious impact from my side is how projects are conducted. If you have key projects, they are quite differently handled so you cannot have the physical meetings anymore. It requires quite a different type of engagement.
I'm working in implementation project, and it's overseas, so you have all these challenges around time zones, you cannot be in a meeting room with people and use a flip chart to illustrate, and that kind of stuff. It really requires a different kind of thinking, and more planning in order to run a project, I think.
When it comes to what you have mentioned around remote control centers, and those kind of things, I think this is a longer trend in mining. The trend is typically to move people out of dangers, and hazardous environments, so this is not driven by COVID itself. Maybe it is accelerating it quite a bit, because there is a bigger need now to avoid the workforce and to reduce the workforce on site.
But this has been a trend already – mining companies are trying to automate more. They try to be more predictive in their production output, and this means a lot of stuff is moving into remote control centers and centralized planning areas, so that they move the people out. And this increases the safety aspect of the entire operations, as well.
Iain Thompson: Thanks, Rudy. Steph, what’s your perspective in terms of how you've seen some of your projects change, and Rudy alluded a little bit to that in terms of delivery and some of the things we're doing to de-risk our projects under the current remote working environment?
Stephanie Porter: I think people have been surprised and pleased to find out projects can run pretty efficiently and effectively remotely. One of the main things I'm looking forward to in terms of being able to travel again is the design portions of our projects. There is something to be said for actually being able to visit the sites, understand what exactly is going to be changing and take a look at that when determining what the future state looks like from a processes, technology, data and people perspective.
We've done what we can in the meantime using virtual reality technology and doing as much remote work as possible, but I think that will be helpful moving forward. And of course, just the general relationship building on a project. These programs, even when they're run really well, are always difficult and always take a while.
The better relationship you can have really helps, and so we've been able to do a good job of cultivating that remotely, and I think everyone has really put a lot of effort into that. That will help when we're able to physically see each other again from that perspective.
Iain Thompson: Thanks Steph, so I’ve noted that you're looking forward to getting back on a plane, right?
Stephanie Porter: To come see you guys out in B.C.
Iain Thompson: Just moving on then to our next question. When I talk to many of the leaders, and this is as you embark, and you talked around the planning up front, Steph, from your perspective, a lot of them have had prior challenges. And not to pick on Phil, but I know you've had some frank discussions with us around some prior challenges that you may have seen in previous ERP implementations. And I don't think there is a single executive within the mining sector that I don't speak to that will highlight a number of risks around prior experiences.
How do they ensure that this round they see value? Let's say everyone understands that this is now a business imperative, and in order to address some of those risks and opportunities that I highlighted earlier, this is the path to take. How do we ensure that this round they see the value? What is the process to make sure that happens?
Stephanie Porter: I would distinguish between avoiding what we call failure, and then going over and above that and achieving value. A lot of literature has been documented and a lot of discussions have been had over the last 20 years or so about why certain ERP programs have failed. That could mean they went over budget, that could mean they went over time, that could mean they didn't achieve their business case or benefits, or were just a difficult experience for the organization.
But regardless, some main things came out of all that analysis. One piece was around stakeholder management and change management. So if you don't have the top level buy in and commitment, you don't have people like Phil who are engaged, making sure that the right resources are given to the program, and that there is the right executive support behind it, then it won't be successful.
On the change management side, a lot of the issues that we see are around adoption. You want to make sure you engage change management very early in the process, because that's what allows you to actually understand what really will be different for your people, what they're going to have to deal with on a day-to-day basis. Also how to make sure that we put specific activities interlaced throughout the project and post-project to ensure that people are actually adopting all of these changes, and you can realize the benefits that you set out to gain in the first place.
The second one is around organizational commitment from a resource perspective. Phil talked about this earlier, but the business resources are key in these kinds of programs. You want to make sure that the organization, no matter how lean it is - lots of our clients are very lean - are able to put forth the right people who really under the business, the requirements of the business, what could change, what can’t change and what that’s going to look like moving forward.
And of course governance – these projects need to have scope control and top down governance, which is really what the consultants are supposed to bring to ensure that you don't find yourself in what we call a death by a thousand cuts scenario during the build phase or the test phase as additional costly things start to creep into the picture. That's sort of around failure avoidance, if you will.
As it pertains to the other side, really getting the most out of the implementation, really getting value driven to your business from this technology enabled business project is as Phil alluded to earlier, the preparatory phase. Eldorado took the time and spent the money to invest in their own success, and bringing value to the broader business. Making sure that we had the right people looking into areas of improvement, trying to understand what actually can be changed and should be changed and how the technology will enable that. Gaining some alignment and accountability around those benefit areas, so our people are comfortable with how they were calculated? Do they feel like a business case was inflicted upon them, or do they think they were part of building it bottom up?
And it really pertains to and is tailored for their organization, and their realistic targets that they believe they can get to. They're willing to sign up for them and take accountability on. Have you done a really good job of understanding what scope is required, and what timeline is required to implement those changes and achieve those benefits? Because that's what comprises the cost of the program. And you want to make sure that the cost that has been built up from the bottom up is very accurate and spread across the roadmap properly.
So if you get the right resources lined up, and you follow the right steps in preparatory phases to really understand those benefits, get people to commit to them, have realistic and accurate costs that you can stick to, and de-risk the program to the best of your ability, then that is the best use of your organization's time, resources and money leading up to one of these programs, because that's really what guarantees success and value being driven to your business.
Iain Thompson: Thanks, Steph. Perhaps what I'm going to do now is we have about 10 minutes left, so I’m going to encourage participants to post their questions into the Q&A panel which I believe is in the bottom righthand side of the screen for each of you. We have had a couple of questions come in – those questions have been related to ESG and environmental health and safety which is certainly a hot topic in the conversations that I’m having at the moment.
Currently, my experiences are that while I’m working with a number of our clients in the space, many have desperate systems that they’re using to manage many of their risk and compliance processes and the environmental management processes. Some of those are less formalized on systems, etc. Rudy, from the questions I’m seeing, you’re probably best to answer. What are you seeing from your SAP clients in terms of creating formalized management systems around this and what is SAP doing in this space to support them?
Ruediger Schroedter: We see quite a bit of focus on ESG. It is not only the operational side, but it’s also a softer side, like community engagement, giving back to communities, and procuring and spend with local vendors. There’s a couple of things that we are working on with our partner ecosystem.
For example, the spend management, local communities (ex. Indigenous populations), we have solutions in procurement that they can set up. Spend volumes for example, you can track that so that you know those types of things. Then there is a lot of on the environmental monitoring with sensors, drones and inspection rounds, so humans and technology are combined here.
There is lots of data which can be collected electronically and manually, and we can bring this data together. We also see an increased focus on the tailings dam management. We work with partners here in that space, which provide solutions on the governing side - combining the data, physical monitoring and triggering the work flows, the governing process and making sure that the right people with the right skills are employed for managing those tailing dams. There are a lot of initiatives there.
When you look at the ERP side, there is a lot in the areas of incident management and risk assessment, so that you identify the critical areas and can monitor those areas, how they develop over time and how those risks get mitigated.
Iain Thompson: And Rudy, so I had the risks up there and the questions do refer towards decarbonization, the energy transition and how these systems perhaps will help mining companies manage and A) reports on one scope, two scope, three scope emissions, and B) the energy transition.
Ruediger Schroedter: It holds for us and it falls under the Climate 21 initiatives. There is an increased focus on mining to monitor the carbon emissions and track those carbon emissions. We are working as mining companies in that space.
The issue is typically that there is no standardized process or standardized definitions for how those data can be calculated. There is a lot of trial and error, I would assume, in this area, to determine how much carbons are emitted and how this is being calculated.
Marine transportation is an important topic; we have customers who are looking into the capturing of the emissions from vessels, and they want to go down to the engine level. It is not just saying, well, this vessel goes 1,000 miles, uses so much diesel, and then we have a rough formula to calculate this. Instead, they want to really go down into the details of the individual engines to calculate it, and then report this to the communities and stakeholders.
Especially for investment companies, it becomes more and more important that they can show that they only invest into ESG friendly companies, and mining companies have to prove that they do everything they can to reduce those footprints.
Iain Thompson: Thanks, Rudy. Steph, another question has come in, and this is around digital transformation. We understand the ERP system, getting a handle on your data and your transaction systems is a key baseline to that transformation. The question is what are some of the major challenges you see in terms of what mining companies encounter in their digital transformation journeys?
Stephanie Porter: I think there is a few things, obviously it depends on the specific organization. But we are seeing a lot of folks that have acquisitions and have the corresponding disparate systems. We're seeing folks that are earlier in the maturity curve on technology. So, they have an interest in things like predictive analytics capabilities, but have to go through the preliminary steps of having clean and reliable data, having data governance, being able to do analytics and getting to predictive analytics.
I think it’s that combination of things in conjunction with the idea that a lot of our Mining & Metals clients are very lean. There is a split focus between running the actual operations and the business in time to have as little disruption as possible and maintain productivity while also simultaneously investing in this kind of a program for their future.
Iain Thompson: Thanks, Steph. We've got about five minutes left. What I'm going to do now, if anyone else wants to post questions, go ahead and we'll see whether we can get another question in.
What I'm going to do is just share with you before everyone logs off, because I know everyone is going to drop in about three minutes … Steph and I's contact information. If anyone would like to take it down, we encourage anyone if you would like to reach out to us, have further questions or require any more information, please contact us and let us know.
Otherwise, what I really wanted to do, if another question doesn't come in is thank our panelists, Rudy, thanks for your time, and your insights. Steph, for yours, and Phil, thanks for bringing a perspective that is certainly very beneficial, because you're embarking on this journey, so your insights are hugely valued by those on the call.
And thanks for everyone for participating and joining. If you do send in more questions, we'll do our best to answer them. Otherwise, what I'd like to do is please ask everyone to take a minute to complete the survey. If you haven't had a chance to do so, it should be live now, and your feedback is greatly appreciated. So, thank you very much.
- Iain Thompson, Partner, Business Consulting Services, EY
- Philip Yee, Executive Vice President & Chief Financial Officer, Eldorado Gold
- Ruediger Schroedter, Global Lead for Mining, SAP
- Stephanie Porter, Partner, Consulting, Enterprise Applications, EY
Time your local time