SOURCE : Kay Sever | September 1, 2019
OPTIMIZATION… When we think about that word, phrases like “achieving the best results”, “eliminating bottlenecks” and “making the most money” come to mind. You are told by vendors and experts that you must buy new equipment and systems to achieve optimization AND that if you make that investment (often millions of dollars), you will achieve optimization. If the executive team decides to move forward with optimization, three words summarize management’s focus: Machines, Money and Maximization.
What if I told you that there are three more areas of focus that will make or break your efforts to maximize results? What if you knew that ROI would be less than you promised the board of directors AND less than was possible to achieve if these areas were ignored? What if you learned that little or no investment is required to include these areas of focus in your optimization plan and prevent lost ROI?
It’s time to pull the veil back on three aspects of optimization that are overlooked, underrated and misunderstood, especially since weaknesses or mismatches in these aspects cause preventable losses that are often not known, measured or reported. It’s time to explore the “organizational side of optimization”: Mindset, Measures and Management.
In this series of articles, you will gain some new perspectives about the Six “M’s” of optimization and how the organizational side of optimization can be linked to the equipment/systems side of optimization to produce the highest possible ROI that is sustainable over years, not months. We will also be touching on the “Performance-Culture connection”, something that is at best vaguely understood by most executives and management teams.
Machines, Money, Maximization – When Capital is Available to Move Forward:
When executives agree to move forward with an optimization focus, company engineers evaluate the production value stream for system bottlenecks, equipment mismatches and capacity restrictions that are preventing production from being higher. Cost reduction may also be part of the strategy. Vendors and experts may be consulted on “state of the art” equipment that would solve these problems. Requests for capital are submitted to the executive team and presented to the Board of Directors. If it is approved, orders are placed. This effort takes place in one calendar year or multiple years with the expectation of a long-term benefit that stretches far into the future.
In this scenario, management’s primary “front-end role” in optimization is determining the equipment needed and approving the capital to buy it. When equipment arrives, management oversees installation and helps solve problems that may occur during start-up. Once the new equipment is in production, management’s primary “back-end role” in optimization is waiting for promised production increases and higher earnings to materialize. There is little for them to do since the equipment is supposed to generate the gains. An assumption is made that the ROI promised by vendors and experts will be achieved because “the equipment was designed to achieve it and that’s what we paid for”.
There are two financial outcomes of a 3M focus on optimization:
- You meet your ROI goals but are unaware that ROI could have been higher with little or no additional investment.
- ROI falls short of expectations (assuming equipment ran as expected) and you don’t know what to change to fix it.
Next month we will explore these two outcomes in more detail.
Thought for the month: “Full Optimization” of a site or company requires a “6M” focus to truly maximize profit over the long term.
Kay Sever is a leading expert in reducing financial losses caused by corporate cultures, optimization and change barriers. She has developed a management training system called MiningOpportunity which is based on her 20 years of experience working with mines and plants to reduce the losses they never measure… losses linked to corporate culture, hidden excess capacity and change barriers. MiningOpportunity modules teach executives and management teams how to find and quantify their losses and apply strategies and tactics that stop them. Unique insights from Kay’s 3-year study of management’s barriers to change and optimization are included in the content. See MiningOpportunity.com for her contact information and several training options for your team, including the NEW “Spend a Day with Kay” option.
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