Improving productivity from market to mine

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How do you prepare for tomorrow’s mine today?

Improving productivity from market to mine

We believe that to truly achieve a sustainable productivity improvement, an integrated end-to-end business transformation, which can only be achieved through a mine-to-market approach, is required.

We couldn’t understand why miners were not focusing more on this area and so we interviewed global mining executives to get a better view on this. Our conclusion is two key steps that can significantly reduce the integration gap:

  1. Adopting an end-to-end process model approach to the business
  2. Adopting digital strategies to reduce variability in the organization, enhance an end-to-end approach and improve decision-making

To be successful, both steps need to be supported with strong leadership and cultural change.

Productivity #1 operational risk for mining

During the super cycle, productivity fell to its lowest rate in more than 30 years, with the sector focusing on production at any cost because of an unprecedented boom in commodity prices. Productivity has been the number one operational risk for mining companies for the past three years.

Many of the mining executives we interviewed observed a decline in productivity levels as their operations expanded, primarily due to the challenge of managing complexity, compounded by the talent challenge, and lack of appropriate skills development.

Integration gap may contribute to 20%+ productivity loss

While mines were scaled up to maximize production, mine managers were not provided with the tools to manage this increased complexity. The scale of these larger mines and the related complexity resulted in an increased pressure on the functional departments to manage these burgeoning workforces.

A silo mentality has crept into the management of mining companies. We refer to the gap between the creation of silos and the desire to eliminate them as “the integration gap.”

Research studies suggest that the integration gap in the mining sector can create a productivity loss of about 10%–20%. Our view is that it could be even higher. So why has the sector not placed much emphasis on it?

Data indicates that asset productivity has barely changed over this time, and this appears to be the hardest area for the mining sector to increase productivity. We, therefore, looked at how the leading industries, such as manufacturing, have gone about solving this issue.

Miners need to adopt a manufacturing mindset

Having a manufacturing mindset can lead to significant productivity and value creation, and in turn helps close the integration gap. However, mining is not a factory as there is far more variability than a factory environment.

Factors such as weather, ore body knowledge, work conditions and quality of people all impact variability. We don’t have a silver bullet to remove variability. But it is possible to reduce it to a more manageable level and improve long-term productivity.

EY - How to address the decline in productivity in mining and metals

How do you close the gap?

Increase productivity and the management of variability by:

To achieve success in either of these and to ensure that any implemented solutions are sustainable, a focused leadership and cultural change are required.

This can be achieved through the process model approach. This is an element of an operating model informing the business on who is performing the processes, how to measure the performance of each process, what the potential risks are and how they can be mitigated and controlled. It is also adopting a focus on end-to-end excellence. Process models are end-to-end, independent of organizational boundaries and cut across different organizational functions to deliver the desired outcome.

The benefits

Process models are very effective in improving current business operations and establishing a common language across the business, and are often used as a foundation for improvement initiatives.

By integrating our processes, we immediately have greater communication and visibility across the line, which leads to improved and more timely decision-making, and ultimately to improved productivity.

EY’s productivity series

Where to from here?

Whether the objective is a rapid uplift in productivity, or long-term sustainable change, the principles remain the same. Companies need to embed sustainable loss elimination practices through employee engagement and an integrated end-to-end approach for long-term sustainable improvement in productivity.

Effective implementation of technology is slow in the sector and the industry is poorly rated for digital intensity. However, digital can be a key enabler of productivity by enabling more effective loss elimination and execution of operational strategies and plans. We will look at how the sector can achieve this in our next paper in this series.