The international mining industry has reached a critical crossroads. A recent BDO study found that 79% of mining executives believe the lack of a skilled workforce will negatively impact their business in 2013. This, combined with declining margins and a need to cut costs, is placing pressure on mining companies to regain real-time control of their often geographically-dispersed operations.
One way in which companies have started to tackle these crosscutting forces has been by implementing and refining a key new business process: the mine (or management) operating system (MOS). The MOS is a combination of integrated processes and tools that together deliver optimised planning, budgeting and operational management. It is rapidly being deployed throughout the industry to increase cost transparency, comparability and accountability.
A MOS puts management mechanisms in place to enable short interval controls across production, maintenance and technical activity at the minesite, with real-time reports fed back to managers. The controls ensure a closed loop from budgeting, planning, scheduling and execution to enable management to take immediate corrective action should exceptions occur.
Common outcomes that mining executives seek to achieve through the investment in a MOS are:
- Operational performance is managed-to-plan with a common way of working (though still tailored for specific mine needs).
- Standardised ways of delivering a consistent and structured approach across mines for forecasting, budgeting, planning, scheduling, execution, reporting and reviewing are implemented.
- Non-compliances-to-plan are managed in a structured and effective way.
- Activity is aligned to strategic objectives. Mining executives seek improved earnings results through structured operating disciplines that deliver a combination of cost reduction, improved production outcomes and better asset utilisation.
Compilation of the trusted data from individual sites can then be used for functions such as marketing (sales volumes), infrastructure requirements (for example, take or pay utilisation) and capital coordination.
What should a MOS deliver?
A successful MOS will deliver to the minesite integrated processes and tools for:
- Daily hand-over meetings, shift review meetings, key performance indicator (KPI) setting, short interval control and shift performance assessment and preparation.
- Weekly performance review meetings, production meetings and shift target setting.
- Integrated monthly production and resource planning (across production, maintenance and technical operations).
Further, the MOS will integrate with management to ensure exception-based reporting on how the minesite is performing relative to plan. Management uses performance data to reset KPIs and deploy resource utilisation and production capacity strategies.
Development and implementation
The effort associated with the design and implementation of a MOS will vary across organisations and minesites. Depending on the development strategy, mining executives have a range of options. These range from purpose-built software packages solutions to custom MOS solutions that use and improve upon the existing systems and processes of the organisation. With the focus on cost containment driving efforts to ensure a solid return on MOS investment, mining executives are increasingly leaning towards MOS development principles that:
- Use existing systems where possible, maximising utility and minimising cost.
- Leverage internal subject matter expertise (no one knows the mine better than those working there), while partnering with external expertise for implementation and management of the change process
- Ensure each mine regards itself as a leader in development and implementation and that system tools are easily transferable across mines.
- Deliver practical system tools and an implementation approach with minimum disruption to ensure the change is embraced and the MOS adopted by those users who determine its success.
Given the potential impact across the whole of an organisation and the strategic importance of a MOS (ultimately increasing profitability), the key management technology considerations for mining executives are:
- Take a whole-of-operation approach. Consider the entire mining value chain when evaluating technology needs.
- Technology needs to be driven by organisation strategy, not by business units or departments.
- Technology usage needs to be aligned behind a core purpose (such as cost reduction and management, productivity improvement) to avoid islands of information or functional redundancy.
- Establish project teams and champions tasked and incentivised to deliver technology improvements. Incentives should link to KPIs, which link back to strategy.
- Manage change to increase user adoption rates within shorter timeframes. There is no point in mandating a strategy and selecting and implementing technology if people on the front line are unwilling or unable to use the technology.
- Be prepared to drive technology implementation through to the end. Technology implementation is not completed until the core purpose of implementing the technology is achieved.
In summary, the implementation of a MOS ensures a supply chain focus to the development and delivery of improved processes and management mechanisms. The primary outcome is that non-compliances-to-plan (budget and performance targets) are proactively managed by giving control back to mining executives. Implementation will require considerable change and project management interventions, the most critical being strategic alignment, development of practical outcomes and holistic technology enablement.
Written by Karina Collins, national lead partner for BDO Consulting, and Scott Birkett, associate director in BDO Corporate Finance. The full mining study report can be found here. This article was first published in the June issue of World Coal.
Read the article online at: https://www.worldcoal.com/coal/17062013/bdo_discuss_the_benefits_of_a_mine_planning_system_225/