SOURCE: Kay Sever | September 25, 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. These upgrades incorporate optimization metrics into decision-making AND modify the way some tasks are executed to capture excess capacity and lost profit. Without these upgrades, efforts to achieve “best possible” performance will be sabotaged from behind the scenes by current management tools and practices (See September’s article for more details).
From September-November, we are covering some specific examples of “management system mismatches” and how “optimization upgrades” helped achieve/sustain “best possible” performance. Last month we covered haul truck tires. This month we are covering drilling operations/performance.
Example #2 – Drilling:
(Full disclosure: I have helped D&B teams “optimize” their processes and improve downstream/value stream performance for copper and coal operations).
There is so much to say about the drilling process, drill management and lost opportunities… for now, I will share an observation after working with many mine sites: In general, D&B activities do not get the same management focus as loading, hauling and processing functions. Here are my reasons for saying this:
- Mobile equipment requires a large capital commitment, so activities that generate an acceptable ROI for that equipment are high priorities.
- Watching trucks, shovels and loaders move tons of material is exciting! Drills sit in one place and drill rock that does not move… not so exciting UNTIL it’s blasted!
- The quantity and rate of tons moved by shovels, trucks and loaders directly affect operational and financial performance… production, variable costs and sales.
Think about your drilling processes. Mine planners determine how many BCYs (bank cubic yards) of overburden/ore must be drilled and blasted. Drill pads are prepared and holes are drilled using patterns that will yield the desired BCY breakage and rock size. As you know, traditional KPIs for drilling include feet drilled, hole depth, bits used, bit wear, and drill operating hours, availability and utilization. Drill stats may be budgeted by fleet using historical actuals. Availability and utilization may be budgeted using historical actuals or guidance for “world class” goals for availability and utilization set by vendors.
IMPORTANT NOTE: Using “world class” goals for your drill downtime budget may help you achieve higher availability, but it will do nothing to help you achieve budget for drill utilization because drill operating delays vary by pit, by site and by mine plan. As a result, world class utilization goals for drills are likely to be too high. This means you are likely to FALL SHORT of your targeted BCY budget and your annual production/sales budget may be unachievable from the get-go. Without a proper understanding of your D&B operating delays, you could unintentionally approve a production budget that SETS YOUR PEOPLE UP TO FAIL!
Inversion Thinking and Drill Management
Inversion thinking involves looking for “what did not happen but could have happened”, then using that information to create a better result that is sustainable. What if you chose to ignore “world class” drill utilization recommendations and used inversion thinking to dissect your drill utilization stats and the operating hours you either LOST or OVERESTIMATED?
OPERATING HOURS LOST: If you had metrics that broke down actual operating delays for drills, you might learn
- You were losing valuable drilling time because a delay was not being managed like it should be (a free solution).
- You could track a simple measure to gain operating hours (a free solution).
- You do not need another drill to increase drilling capacity because you already had hidden excess drill capacity that was hidden by poor delay management.
- You could avoid “blasted inventory shortages” and all the problems that come with them. How many millions of dollars would that be worth?
BUDGETED UTILIZATION OVERESTIMATED: Optimization metrics may show that the “best” drill utilization you could achieve was 20%-30% LESS than world class and/or budget given the variables at your site. (I have discovered utilization variances that big in my work).
-
- When budgeted utilization is significantly higher than “best” utilization, that variance
- Explains budgeted drill targets that were missed year after year and
- When budgeted utilization is significantly higher than “best” utilization, that variance
b) Affects other activities controlled by management such as employee bonuses/incentives, capital needs/expansion plans, and value stream management strategies.
- Management’s response to this discovery is key because it touches more than drill productivity… it changes what management believes is possible to achieve. What management says and does in this scenario can positively or negatively affect workforce relations/trust, corporate culture (“the way we work”) and management team credibility.
SUMMARY REMARKS: 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.
- Fix problems that could not be fixed in the past.
- 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 November, we will be covering another example of “management system mismatches”… how it is linked to optimization, how it 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.
To comment on this story or for additional details click on related button above.
- 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.
