Mine operators are being urged to address the decline in productivity which has been plaguing the sector for a decade. They must drive inefficiency out of their business at every opportunity in order sustain long term profitability. Recent research by Ernst & Young has found the effect of weakened productivity has ranked as the highest risk faced by the mining industry, as commodity prices continue to decrease and margins are cut, meaning there is nowhere else to look for profitability.
Many companies have been dealing with this substantial drop-off in productivity through a series of cost-cutting exercises or point solutions. BHP Bilton's iron ore business in Western Australia has recently reduced production costs from $50 per tonne to $25 per tonne, while Fortescue Metals has extended working rosters to two weeks on and one week off to save money on airfares. However, there is no simple fix to improving productivity, and despite attempts to cut costs, businesses are hurting.
According to Ernst & Young's Global Mining and Metals Leader, Mike Elliott, this process is transformational and takes a lateral and broad-thinking approach to success. Cost cuts are not enough to achieve long term sustainability, and real productivity gains will only come from a whole business transformation, including upgrades to fleet equipment and increasing automation.
So, how can mine operators address this issue and drive and improve productivity across their business?
- Driver behaviour - while this lends itself to improving safety, there are several productivity gains to be achieved from improving driver behaviour. With GPS fleet management technology, you can gain added insights to driver and vehicle behaviour, highlight any areas of concern with individual drivers and schedule training. This will help reduce general wear and tear, minimise fuel costs and increase the life expectancy of a vehicle.
- Fleet maintenance - without closely monitoring fleet operations it is difficult to know when a vehicle requires attention. This may result in either insufficient maintenance, leaving business open to equipment failure, or excessive maintenance, unnecessarily wasting time and money.
- Data analytics - data analytics can be used to build a key performance indicator that monitors the performance of individual vehicles and different work sites. It is possible to receive alerts each time a vehicle accrues more than 30 minutes per day in waiting mode. Data can also indicate whether there are too many vehicles or pieces of equipment in one place at one time. Accessing more detailed information about mining operations means minimising idle time and reducing inefficiencies when managing a big job or large work site. Historical data can then be used to better plan the next job.
In the mining industry's current environment of muted pricing, improving productivity is undoubtedly the most effective way for organisations to boost profitability. Ernst & Young's research is a clear reminder that sustainable productivity gains will only result from changes to the entire business, which rely on aligned planning, budgeting and performance measurement. With real-time visibility across operations and increased business insights, mine operators are one step closer to achieving this.