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With worldwide prices for many commodities like precious metals, chemicals, and even food products continuing to fluctuate, many industries are struggling to match their production with market demand. In addition to the havoc this causes with labor requirements and planning, it has a huge impact the availability of major production-related assets.
Advances in technology continue to change industrial processes therefore reducing the amount of work done by a skilled labor force; given that, a strong Asset Maintenance Program is a necessity.
1) The increased need for major capital-intensive assets like earth-moving equipment, cranes, tankers, drill rigs, etc. has become essential to boosting production, so the need to leverage these fixed assets has never been more critical. Consider that the value generated from increased asset utilization has a multiplier effect. Just a 1% improvement can have an exponential impact on the bottom line.
2) While the above point may seem obvious, the caveat is that it is often not fully realized…Why? Because while these assets may be necessary, they have become harder to maintain and operate, which has decreased the value of the production increases they generate. As a result preventive asset maintenance with a reliability-centered maintenance (RCM) approach is critical to keeping these assets performing at or near their optimal level.
This approach applies to not just movable equipment, but to entire facilities like power generation plants, chemical, oil & gas refineries, and manufacturing facilities. The turnaround time for shutdowns and planned outages can be greatly reduced with a strong Asset Maintenance plan.
3) Better leveraging fixed assets by keeping operating costs low should be one goal for any company involved in production, processing, or any heavy industry. Revenue-generating assets can represent billions in capital investment. Appropriate preventive maintenance requires a robust Asset Maintenance program and will keep your assets well maintained and capable of meeting present and future production demands
Maximizing the utilization of revenue producing heavy assets is a key driver for financial performance!
Recently, our mining team was asked to conduct a study at a silver mine in South America. The goal of this study was to uncover inefficiencies and implement a continuous improvement program within the mining operation and ultimately reduce operating cost per ounce. This was in response to the rapidly dropping price of silver. Therefore, time was of the essence. The recent volatility of this commodity had the management team at the mining company looking for ways to drastically reduce cost in their operation. Our response was to send a team of eight consultants to Argentina for a twenty-day site visit to conduct an analysis of the opportunities.
Discovering what an organization is currently using to manage its business is one of the most interesting parts of a study. You can quickly tell what is working for them and what isn’t. Usually, we are able to find some elements of a Management Operating System (MOS). Sometimes, more often than not, we discover that a functioning/closed-loop MOS is not in place or being used. This is also an early indication that the management team does not have full control of their operation. They may be measuring performance as a lagging indicator, but are unable to provide any leading indicators to performance trends. Without a closed-loop MOS it also becomes very difficult to make continuous improvement changes to impact performance and to actually measure the impact of those changes. Reporting alone will not allow management to do this. This is the first element we focused on at the silver mine.
Based on the initial assessment, our team and the client developed a realistic target for a reduced cost per ounce. In order to obtain the new reduced cost per ounce target, fifty Continuous Improvement Programs were developed. Continuous Improvement Programs vary in size, but all drive towards the same end goal of efficiency. In this case, the Continuous Improvement Programs developed were all intended to impact the utilization of a given level of resources. It is important to understand how much your resources are capable of without road blocks because this will be your “technical limit”. Although a technical limit is often unattainable, this is what the organization and management should be aiming for. Continuous Improvement Programs work to remove all of the road blocks possible in an effort to bring the operation as close to their technical limit as possible.
We were onsite to assist in the planning and implementation of each item from start to finish. With such a large number of Continuous Improvement Programs, it was very important to measure the progress towards completing each one and the associated impact they would have on the cost per ounce as they were completed. The financial impact of the changes was measured on a monthly basis.
An important tool to use in conjunction with a Pareto chart is a heat map. Plotting action items on a heat map will allow you to prioritize each item based on two or more distinguishing variables. I typically use “ease of implementation” and “level of impact”. If you rank each item on a numerical scale and graph the results, it will provide a strong visual as to which items should take priority over others. From a results standpoint, you would ideally complete the items that will have a high impact and are easy to implement. This will provide the greatest yield with the least investment (time or otherwise).
There are several reasons why using this method can be a very effective way of managing action items. Firstly, process owners or champions typically have the most energy at the front end of the process. They are eager to make an impact and want to be a part of the leading charge. Secondly, it is very likely that as time goes on, new issues will arise and thus, more action items added to the list. There may be some new items that should take priority over older ones because of their importance. By maintaining an up-to-date heat map, each item can be analyzed for its individual importance.
What we have often found with a great deal of our clients is that when we arrive, they are not exactly sure what their organization is capable of. As we begin to show bursts of improvement throughout the project and provide tangible results, they begin to see how attainable continuous improvement really is. In addition to the fact that these results are attainable, they also realize that they are the ones taking ownership of it and to various extents, beginning to walk down the path themselves. The management operating system is theirs and could not function without them. At this stage, the behavioral change process has taken effect and this is what will drive your lasting results. This is the part that will bring your organization savings year over year.
Recognizing your business’s need to make changes to your operations is the first step in the process improvement process, but how you go about it will make or break your business. When you engage only internal resources to make a plan for improvement and then implement that plan, you are at the mercy of their time and knowledge. While you know your business better than any outsider, you are also limited to possible solutions because you have not been through this a hundred times before. You’ll suffer through the trial and error process at the expense of your business.
Within any organization, you’re constantly keeping up with everyday maintenance, finding ways to improve upon your current state, and monitoring what your competitors are doing to increase their value. There are plenty of things you can do on your own to help improve certain aspects of your business, but when you need to make a major overhaul to one area or the entire organization, it’s time to call in the experts.
Your Business is Like Your Home
When renovating your kitchen, you wouldn’t hand each family member a sledge hammer and tell them to start the demo or let each of them take a corner of the room to put in the specific things they want. During the renovation, they also have to keep up with their regular duties throughout, so the improvements would be done at different paces, with different levels of craftsmanship. Unless your family is made up of an interior designer, an electrician, a plumber, a carpenter, and a general contractor, your kitchen probably isn’t going to turn out better than it was before.
When your organization approaches process improvement plans, a functional cross-departmental plan is unlikely to emerge in a timely manner. Even with a plan, you need to trust that your people know what they are doing and can actually do it while keeping up with their regular workload. Does your organization have an expert for each aspect of the change who can devote the necessary time to execute the process improvement plan on time? If not, this may not be the right approach.
If you are able to complete this change without outside assistance, you may enjoy some short-term benefits. However, when things start to breakdown, you will have to go back and try to fix them, adding to the cost of the process improvement. Continuing to patch-up parts of your business over the long-term will reduce your overall efficiency and chip-away at your bottom-line year after year.
Buying the “How To” isn’t a Sure Thing
Some organizations believe that they just need the right plan, and everything else will fall into place. These organizations will pay an outside firm for an assessment and purchase a “How To” guide based on the results. While they may have the manual telling them what to do to make the changes they desire, they are often unable to fully implement the outlined process improvements.
If this was how you planned to renovate your kitchen, the results would be better than the first approach. Hiring an interior designer is the right move, but reading about how to install electrical, gas lines, and plumbing doesn’t guarantee everything will function.
Leave it to the Experts
By bringing in outside resources specializing in operational process improvement and organizational restructuring, you remove much of the risk and stand to achieve better results in less time than an internal approach. Their people will do all of the work and your people will reap the benefits. While having someone else complete the entire project from development through implementation may cost more in the immediate future, the guaranteed success and long-term benefits make it the obvious choice.
Selecting a contractor with an experienced crew to design your dream kitchen and meticulously complete each piece of the renovation to your exact standards, will ensure your kitchen is done right the first time. Investing in the right resources adds value to your home and increases the overall functionality of your household.
Taking the opportunity to invest in your business when making process improvement changes is crucial to achieving your long-term goals and ensures the change doesn’t shift your business in the wrong direction. In the end, your staff will have the tools and training to maintain the new processes.
One of the benefits of working for a consulting firm is the exposure to a wide range of industries and working environments that a majority of the population will never have the opportunity to experience. Most people will never step foot in an underground gold mine, a candy factory, a pulp & paper mill, or a chemical processing plant, let alone work in all of those places in a given year. We are not most people, and we work in all types of places with all types of clients. It’s the variety of situations that draws us in and the need to improve those situations that brings success to our clients.
Why do we love consulting so much? Because…
We are genuine problem solvers. The thrill of taking on a new project with its own set of challenges is why we are in this business. We’re hungry for the chance to apply our unique set of skills to a project and see it through. We like to find the source of each issue and apply the right solution to correct it. It’s not a problem for us to fix, it’s a puzzle for us to solve.
We are driven to improve upon the status quo. We don’t like living with things that are good enough; we want them to be the best. We know that processes can always be improved and small changes can make a huge difference. It’s this need to constantly evolve the way we do things that gives our clients the results they desire.
We have the capacity to see more. From within an organization, it’s hard to see where the disconnects are or imagine doing things differently. When a client opens up their doors and lets us in, we see the potential for what their business is capable of. This outsider’s perspective often reveals more than internal audit. We are not bound by the limitations of how things are, we visualize how they could be.
We get to learn from everyone. The knowledge gained from all of our various work sites is a major asset we can bring to our clients. A seemingly unresolvable issue in one industry may have a solution discovered in another. We get to apply our knowledge from several industries to problems in completely different ones. We can apply solutions from mines to offices or hospitals to manufacturing. By coming in with a different outlook, we can suggest an alternative not previously considered.
As a consultant, the experience gained and the opportunity to make a difference for our clients is unparalleled in any other job. We get to bring our ideas to the table, work to implement those ideas in the real world, and see the results. Every client is different, but the desire to succeed at each project is always there.
With commodity pricing continuing to fluctuate worldwide, mining companies and other heavy-asset industries can benefit from better alignment of their revenue producing equipment with market demand. This does not require a significant capital investment. Inexpensive and sustainable approaches are available. Read out latest whitepaper from Charlie Payne, Senior Operations Manager in our Global Mining & Metals Practice to learn more.
Recently, I have been discussing supply chain evolution. My previous post provided a series of questions for you to assess where your organization is on the supply chain evolution continuum. Hopefully, you took a few minutes to think about the questions and answer them honestly. If not, take a few minutes to look at the assessment and answer the questions before reading on. Now that you have your answers, look below to find out how your organization is evolving.
As you can probably tell, determining your organization’s evolutionary progress and where you are on the continuum isn’t black and white, as your organization might be more advanced in some areas and less so in others; likewise, the supply chains for different brands or product lines might be at different stages of evolution.
APICS offers some additional structure by defining four stages of supply chain evolution on pages 1-18 and 1-19 of their Fundamentals of Supply Chain Management module as follows:
- Stage 1: Multiple Dysfunction. The (potential) nucleus firm [organization] lacks clear internal definitions and goals and has to external links other than transactional ones.
- Stage 2: Semi-Functional Enterprise. The nucleus firm [organization] undertakes initiatives to improve effectiveness, efficiency, and quality within functional areas. While some or all functions engage in initiatives designed to increase efficiency within their departmental walls, there is little or no overlap in decision-making from one department to another.
- Stage 3 – Integrated Enterprise. The firm [organization] break down silo walls and brings functional areas together in processes such as sales and operations planning (S&OP) with a focus on company-wide processes [and cost reductions] rather than individual functions.
- Stage 4 – Extended Enterprise. The firm [organization] integrates its internal network with the internal networks of selected supply chain partners to improve efficiency, product / service quality or both. The starting point is generally one inside / outside partnership that points the way to a completely networked enterprise.
Today, most organizations fall in the middle of the supply chain evolution continuum operating somewhere in or between Stage 2 and Stage 3. While many aspire to achieve Stage 4, few have successfully achieved this level of evolution and built sustainable partnerships with multiple members of their supply and customer base. Regardless of where your organization is on the continuum today, achieving higher levels of evolution in the future is possible. The future depends on…YOU. By ensuring that you think outside the box; integrate and collaborate with suppliers and customers (internal as well as external); and look to create win-win solutions throughout your daily activities, process execution, and interactions you can play an active role in your organization’s supply chain evolution.
In my previous post, I explained how building strong client relationships makes the project process easier and increases overall success. As a company, we pride ourselves on our ability to integrate into our clients’ organizations, find the right solution, and leave them with the capability to continue improving after our project is complete. Part of this comes from our client-centric mentality and constant efforts to be a positive force for our clients. This can at times be difficult for both sides, as it involves a change process that many people are naturally uncomfortable with. The discomfort occurs especially when employees are perfectly content with their positions within the organization. It also involves a large amount of patience from our team. We must explain the process, allow it to sink in, and continue to reinforce all of the main points. Often times a client may develop their own view of the intent of a Management Operating System (MOS) and it is important for our team to remain calm, stay focused, and continue to work with the client to repeatedly direct their attention towards the valuable output of an MOS.
Listening and Understanding
Our first task at every project is understanding our client’s issues, perceived limitations, and goals. We strive to learn their working style, culture, and comfort level. It is during this initial stage of the relationship that we can quickly lay the foundation for success or failure. The quicker we are able to learn our client’s likes and dislikes about their job, the more time we have to build upon that later. This can sometimes be a balancing act between providing impact at a focused level or at an organization level. We recently ran into an example of this at a logistics site office. A site director could not understand why the specific changes he requested were not being completed immediately and were not on the top of the priority list. When dealing with such a decentralized organization, communication and coordination of changes in the management system must be consolidated. This process can sometimes take more time and energy than the client is initially prepared for. The communication of this at the beginning of the engagement is very important so that the client can be prepared for the project as well.
Uncovering Opportunities Together
After we understand the issues, we move forward in discovering the solution, keeping in mind all that we have learned about our clients so far. Their acceptance is important, so we make sure we adequately explain what we plan to do and how we plan to do it. This can be difficult as it requires a certain degree of finesse. It is important that our clients design the answer and we simply facilitate. It is not a game of who is smarter, but rather a training process to view issues as opportunities. We believe that permanent change must always come from within. We will often work through the brainstorming process several times on our own before working through it with a client. This is especially important for the problems that the client feels cannot be solved. One of the first steps we took at a recent project was to train the office staff on identifying issues within the process they were using. This may seem like a straight forward task however, it can be extremely difficult when a “work around” or broken process is part of your day-to-day routine. We worked one-on-one with the office staff to help them review their individual processes by having them decide if each activity is value added or non-value added. We also asked them if they thought there might be a better method of doing each specific activity. Once they began to make this distinction, true exception time (office non-value added time) can be measured and quantified. You can really surprise a client when you help them solve a problem that they truly believed was just the “nature of the business”. One of my first posts described in detail the Root Cause Analysis process; this same process can be applied to any issue or problem, and with the right expertise in the room, will often uncover some interesting solutions to the main issue. While working through this process one client remarked that, “We would never be able to get rid of this problem. It would always occur as it is part of our business.” He was entirely accurate in his statement. However, what if 60% of the issue could be reduced? The business essential 40% would remain, but the capacity from a 60% reduction in major office issues would open up, leaving plenty of room for growth.
Making the Real Change
The implementation of our proposed solutions can be the most challenging phase of a project in regards to our client relationship. Often, this is where other firms will stop and leave the most difficult portion of the change process up to the client. This is the most powerful stage in the process, as it can merit our client’s infinite trust or make us seem like we’re “all talk”. When we actually start changing the way things are done, we are met with more questions and contentions. An immediate overnight change is very unlikely, as real change is a process that takes energy and problem solving. Our clients realize that we have not just shown up with the answer, we’ve begun to provide them with the tools to expose the answer. It is common to experience a significant amount of push-back from direct managers. This is in large part due to the proximity they have with their employees and their day-to-day understanding of their own KPI’s (Key Performance Indicators). At a recent project, one of the managers was questioning the difference between having the numbers on paper coming directly from day-to-day operations and having them in his head from speaking with his people throughout the day. A comment was made that he knew the business and the reports would only confirm what he already knew. There are several issues with having all of this information in one person’s head. Firstly, if he was sick or on vacation there would need to be a suitable replacement that could decipher the same information. In addition, on a day-to-day detailed basis, management may have a good general sense of the state of the business; however, they typically can’t speak to a weekly trend, monthly trend, or correlations between various KPIs. We need to think about the future. What will the requirements be when the business grows? What happens when there is a shift in management reporting structure? What is the true cost of doing business? If all of these questions can be answered accurately, the management team will be ready for growth. If not, they may be able to maintain and sustain, but will have a large degree of difficulty when it comes to change and growth.
Training for Sustainability
After the changes are implemented, we invest time in training the client team to sustain and continue improving their processes. By transferring the ownership over these improvements to their people, we ensure our solutions last. We know as soon as we get to this phase whether or not our client truly understands that value of what we have put in place at their organization. If they understand this, they will gladly take over any and all responsibilities as they will be receiving 100% credit for positive change and have been given to tools to drive it. This is an excellent final gauge to understand if your implementation was initially successful. If you sense hesitation on the client’s part at this point in time, you must quickly identify the frustration source and review the intent with the client. At this point in the process, the client should be seeing the value and wanting more. With each significant change they are getting closer and closer to perfect.
At the End
Our projects are only complete when we are confident that our client is able to sustain the changes we have implemented. By understanding their issues, working with their people, and providing adequate support and training, we know we are leaving our clients in a better place with the tools necessary to succeed. We leave behind a management team prepared to take on the challenges of the business equipped with the tools to do so. This is our commitment to each and every client.