SOURCE: Kay Sever | August 29, 2024
The Renaissance Period was rooted in a desire to explore and discover new knowledge. Renaissance thinking focused on discovering “what was unknown, overlooked, missing or misunderstood”. In 2024, we will be using Renaissance Thinking to understand what’s missing from a traditional optimization scope and how to broaden that scope to capture millions of additional dollars with no additional capital.
For those that are new to this column, here’s a brief summary of topics that set the stage for this article:
In February we explored the history of accounting and learned that the 800-year-old accounting system developed by merchants to track trade (i.e., “buy and sell”) transactions, inventories and profit is still in use today (with few modifications). Companies around the world use it to track/report revenue, costs, inventories and profit. We learned if your goal is optimization (i.e., “best possible” performance), the financial system does NOT contain or report metrics for that goal.
Optimization Metrics quantify “how good you can be” and give executives and management teams a new context for their “upside potential” or money they “left on the table”. The gap between today’s performance and your “best possible” performance is defined by:
- Existing but hidden production capacity that has not been tapped.
- Profit potential (profit that equipment and people were capable of generating but didn’t).
- Hidden financial losses linked to organizational weaknesses.
It is important to know that once your team develops an optimization metrics dataset, the metrics alone will not deliver or sustain “best possible” performance. A subset of management’s tool box must be also upgraded to drive “best possible” thinking and actions across the organization.
The “Management System Mismatch”
A subset of management strategies, tools, processes and policies are used to “run an operation” and help decision-makers meet budget. Because meeting budget is NOT THE SAME as achieving “best possible” performance, this subset of tools/tasks must be upgraded to meet the requirements for optimization success and sustainability. In this context, upgrades involve incorporating optimization metrics AND executing tasks in a way that enables the capture of lost profit dollars and excess capacity.
If these upgrades are not made, efforts to achieve “best possible” performance will be sabotaged by the very system that executives and management teams work in every single day! Executives and management teams will
- Make less money than they could have.
- Spend more money than they need to.
- Revert back to old ways of doing things.
- Lose the “future gains” they worked for.
- Attribute these losses to a belief that “change is just too hard”, “it’s just the way it is here” or “we picked the wrong initiative”… none of which will be true.
- Not realize the ROOT CAUSE of these losses and failure to achieve/sustain “best” performance: “optimization disconnects” in the management system that were not upgraded.
Management System Matching for Optimization is Similar to “Equipment Matching” in the Pit
If you have doubts about the above section, think about the importance of equipment matching for a moment… loading and hauling equipment is a great example! Every mine management team knows that matching trucks to shovels is critical to both safety and productivity in the pit. What if matching existing management tools and processes to optimization requirements was just as important to achieve and sustain “best-possible” performance? Well… it is!
From September-November, we will be cover some specific examples of “management system mismatches” and how “optimization upgrades” helped achieve/sustain “best possible” performance.
Example #1 – Haul Truck Tires:
(Full disclosure: I have helped “upgrade” tire management systems to achieve “optimized” tire life and cost for copper and coal operations).
Think about your process for maintaining haul truck tires. Your tire teams inflate/rotate tires, track operating hours, measure tread depth, track wear and respond to in-pit tire failure events. Vendors tell you how many operating hours you should get from their tires, but actual hours will vary based on weather and road materials/conditions at your operations.
A traditional tire management system will tell you the cost of each tire, the operating hours you got on each tire and the reason for failure. You are likely to budget for annual tire costs based on your historical annual usage/cost for tires (i.e., if you replace 50 tires in 2024, you will likely budget for 50 new tires in 2025). This approach may help you achieve budget, but it will do nothing to help you extend tire life and/or reduce your total spend on tires.
Inversion Thinking and Tire Management
Inversion thinking involves looking for “what did not happen but could have happened” in your business, then using that information to create a better result that is sustainable. Using inversion thinking, what if you understood more about the tire hours you lost but paid for and the dollars that were wasted?
- What if you had metrics that quantified these losses?
- What if those metrics showed that you were losing 20-40% of the tire hours you paid for… losses that you had accepted for years as “just the way it is here”?
- What if you linked those losses to specific tire management and equipment operator practices, changed some practices to extend tire life, and changed the way you communicate tire performance to your people, (all free solutions)?
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- How many more hours could you get from each tire?
- How many more tires would run to “wear-out”?
- How many more rock cuts and side wall cuts could be avoided?
- How many dollars would you SAVE on tire costs?
- How much less could you budget for tires the following year?
- How much cumulative savings on tires would you incur over the next 5-10 years?
REMEMBER: If your goal is “best possible” performance, you need optimization metrics to measure what was lost or what you DID NOT ACHIEVE. As these losses approach ZERO, you know you are operating at “best possible” performance levels (a different way to look at your business)!
By applying metrics to things usually not measured…
- Unquantified financial losses.
- The gaps between today’s performance and the “best” your equipment and people can deliver.
- Organizational weaknesses that interfere with achieving “best possible” performance.
… executives and management teams can strategically connect those metrics to management tools and practices linked to performance. This linkage plus a modification in execution will
- Maximize ROI from existing equipment and people.
- Postpone expansions as higher performance is achieved with your current equipment set.
- Sustain process changes over the long-term because management now knows the financial cost/loss created by NOT sustaining them.
In October-November, we will be covering other examples of “management system mismatches”… how they are linked to optimization, how they can cause losses WITHOUT a company knowing that a loss has occurred, and how mismatches can be “aligned” to give leaders what they need to succeed!
Thought for the year: Renaissance thinking has a direct application in positioning your company for success with capital-free optimization. If executives and management teams foster and nurture the desire to explore for hidden profit potential everywhere, what they learn will give them a huge advantage when they want answers to “what’s possible to achieve”.
Kay Sever is a Performance Optimization Expert and Optimization Management Strategist/Coach. Kay helps executive and management teams quantify and tap their hidden profit potential to reach their optimization goals. Kay has developed a LIVESTREAM management training system for Optimization Management called MiningOpportunity – NO TRAVEL REQUIRED. See MiningOpportunity.com for her contact information and training information.
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- About Us
Kay has worked side by side with corporate and production sites in a management/leadership/consulting role for 35+ years. She helps management teams improve performance, profit, culture and change, but does it in a way that connects people and the corporate culture to their hidden potential. Kay helps companies move “beyond improvement” to a state of “sustained optimization”. With her guidance and the MiningOpportunity system, management teams can measure the losses caused by weaknesses in their current culture, shift to a Loss Reduction Culture to reduce the losses, and “manage” the gains from the new culture as a second income stream.
