Photo by: Bloomberg
TORONTO (miningweekly.com) – Miners will need to radically transform their business models if they wanted to reverse the decade-long decline in productivity, a new report by professional services firm EY has found.
‘Productivity in mining: A case for broad transformation’ described the drop-off in productivity, on both a volume and cost basis, as being a result of companies choosing to pursue production growth and headline revenue during the commodity price boom.
"Companies caught in the race to capitalise on high commodity prices were now facing a number of business model challenges. Operation expansion and inefficient use of labour and equipment are all compromising productivity,” EY's Canadian mining and metals leader Bruce Sprague said.
Many companies adapted processes, performance measures and corporate culture solely toward growth during the supercycle and were now paying the price.
"There's no easy solution to solving these challenges. Cost-cutting exercises and minimal process and technology improvements aren't enough,” said Sprague.
A narrow focus on continuous improvement would not solve the problem and could even be counterproductive by simply moving the problem along the supply chain, the report emphasised.
"Creating sustainable change requires broad business model transformation. That means looking closely at mine plans, reassessing mining methods, making changes to equipment and considering opportunities for automation,” Sprague noted.
An end-to-end business transformation solution includes five steps, namely a clear strategy based on a broad set of value drivers; an operating model that is aligned with the strategy; integration and alignment across the value chain through process integration; standardisation of work procedures; and aligned planning, budgeting and performance measurement.
"Understanding all systems and processes is essential to ensure companies make informed decisions. Only then can miners create lasting change,” Sprague said.