When prices for commodities come under pressure, so do the margins of operators. To maintain margins and sustainably reduce costs, it is essential to remove loss and waste. Costs can be reduced in the short term by delaying maintenance expenditure and, at times, this may be necessary to keep the business operating. However, in order to reduce costs in a sustainable manner, it is necessary to reduce loss and waste systematically and this should occur continuously during the good times in the commodity cycle.
Previously we were asked to identify the opportunities for sustainable maintenance cost reduction at a Queensland Coal mine. We were able to identify many millions of dollars in sustainable cost reductions by reviewing the key areas that Bluefield has identified are the greatest areas of loss and waste in mining maintenance.
Some of these are as follows:
Major components that do not reach their full potential life. Major component costs typically represent 50% of the total operating costs for equipment.
Time taken for tradespeople/artisans looking for parts or tools, especially during scheduled work. This unnecessarily inflates the labour costs.
Wasted/Lost spare parts and core return charges.
Unnecessary hire equipment on site, eg. cranes, lighting plants.
The mine was forecasting a $120m maintenance spend on a $100m budget in the 3rd month of the financial year. We were asked to assist the site to get the forecast back on track. There were still funds to invest in improvement so no need to slash and burn, there was time to reduce the costs in a sustainable manner.
The steps we followed to assist the site to reduce the costs were as follows:
Show the maintenance costs/Total Tonne Moved benchmark so that the maintenance team could see where they sat compared to their peers.
Identified their major component life forecasts and compared these to best practice.
Reviewed the labour on site compared to the required labour on site (see our labour estimation tool here).
Identified areas of wasted parts.
From these focused areas, we were able to assist the site to return to their $100m budget forecast and most importantly, the maintenance manager was also supportive of the initiatives and felt that they were his own.
Bluefield recommends that businesses should review these benchmarks annually and identify ways to continually and sustainably reduce loss and waste!