According to a 2019 survey, most miners believe business improvement improves productivity. However, up to 30% think they could be more effective. Here are some concerns expressed by business improvement managers and shared by mine executives: · Expected results often do not materialise. · The impact on the bottom line of the typical project is less than desired. · Too many improvement projects overload resources and managerial attention, leading to project fatigue. · Project impact on the bottom line is difficult to measure. · After a promising start, momentum is lost. · Dealing with resistance to change. Let's look at some general obstacles before surfacing the root conflict causing these problems. The first obstacle is what TOC calls the Cost World paradigm. According to this view, a cent saved in every department is a cent saved to the entire system, and thus, cost savings should be attempted in all parts of operations. This is in opposition to the Throughput paradigm, which focuses first on increasing the system throughput, and lastly, saving operating expenses. Suppose improvement projects are run without an ROI prioritisation system and capping the number of open projects. We will eventually reduce the effectiveness of the available resources through multitasking, make lead times expand and cause loss of momentum. Finally, the link between improvement efforts and bottom-line results is often unclear in operations. Root cause: Efforts at wringing cost out of processes upstream or downstream from the constraint can cause multiples of "cost savings" to be lost in Throughput. If our production process is unstable (especially if it involves moving bottlenecks), matching improvement to bottom-line results becomes difficult, increasing resistance to change. What can we do to increase the ROI of our improvement projects dramatically? Solution: Focus on increasing Throughput and use Throughput Accounting for decision-making and communication of results. 1. To generate the maximum Throughput (sales value/ton – truly variable cost/ton ) in operations, we need to stabilise our production process by getting the most out of our production constraint (also called the bottleneck) and setting up other departments to ensure this never stops due to blockage or starvation. The productivity platform, dealt with in previous posts, effectively achieves this. 2. Rank improvement projects by the expected return on investment ROI= (ΔT-ΔOE)/ΔI, where T is Throughput, OE is operating expense and I investment and set a hurdle rate. (We do not deal with safety-related projects in this discussion) 3. Limit the number of open projects to increase the project completion rate. 4. Display the impact of improvement projects on Throughput across the organisation. What is missing in this discussion? Please comment below. #businessimprovement #mining #toc #throughput #costreduction
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