Companies must overhaul business models to get productivity
back on track
VANCOUVER, July 24, 2014 /CNW/ - Miners will need to
drastically transform their business models if they want to reverse
the decade-long decline in productivity, according to a new EY
report.
Productivity in mining: A case for broad transformation
describes the drop-off in productivity, on both a volume and cost
basis, as a result of companies choosing to pursue production
growth and headline revenue during the commodity price boom.
"Companies caught in the race to capitalize on high commodity
prices are now facing a number of business model challenges," says
Bruce Sprague, EY's Canadian mining
and metals leader. "Operation expansion and inefficient use of
labour and equipment are all compromising productivity."
Many companies adapted processes, performance measures and
corporate culture solely toward growth during the supercycle and
are now paying the price.
"There's no easy solution to solving these challenges," says
Sprague. "Cost-cutting exercises and minimal process and technology
improvements aren't enough."
A narrow focus on continuous improvement will not solve the
problem and could even be counterproductive by simply moving the
problem along the supply chain, the report emphasizes.
"Creating sustainable change requires broad business model
transformation," says Sprague. "That means looking closely at mine
plans, reassessing mining methods, making changes to equipment and
considering opportunities for automation."
An end-to-end business transformation solution includes the
following five steps:
- 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
- Standardization of work procedures
- 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," says Sprague.
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SOURCE EY (Ernst & Young)