When the mine delivers good financial performance, miners attempt to increase production by adding more capacity. They achieve this by debottlenecking, needing substantial financial investment in added capacity. It is a popular strategy.
TOC offers a more effective leverage of the current investment for a greater return. It maximises the performance of existing resources with minimal added investment. By identifying the bottleneck and running it at the maximum rate, TOC ensures the bottleneck is never starved or blocked, thereby delivering the highest ROI. This approach can significantly boost your financial performance and bring about a positive change in your operations.
Identifying and managing the bottleneck.
Current mining processes have near-balanced capacity, resulting from years of rigorous efforts to eliminate waste. By using historical averages (or best practice) of performance, we ignore the fluctuations in performance within each step of the mining process and the interdependency between them. This balanced capacity and fluctuation results in a moving bottleneck, something we cannot predict or control. On paper, balanced capacity chains appear efficient, but variability and interdependency within the system mean theoretical efficiencies are seldom achieved, and the work environment is placed under unnecessary pressure.
A moving bottleneck means the output of the production chain is substantially lower than the actual capacity of the bottleneck. If there were no moving bottleneck, work would build up in front of this bottleneck, something we do not see in a balanced capacity system.
Experience shows that when there is a moving bottleneck, production increases between 10 and 40% is achievable without additional investment. The effect of a 20% increase in throughput, with only the associated increase in variable cost, is significant. In 2015, such an increase in throughput for the top 40 miners would result in a 345% increase in EBITDA.
Where should the bottleneck be placed?
Should the bottleneck remain in its current position, or should a small investment be made to move it to another process step? The bottleneck should reside where investment in capacity is most difficult or most expensive, typically the processing plant. This ensures maximum ROI.
The Theory of Constraints, when combined with modern people management interventions, can assist miners in delivering significantly improved financial returns.
Next step – A Process Of On Going Improvement (POOGI).
Once the whole system is running at above 90% of its installed capacity, and more throughput is needed, a process of ongoing improvement can be implemented. With the current bottleneck location and output stable, additional investment calculations become straightforward, increased capex expenditure is easier to motivate and more likely to be approved.
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