From knowledge to innovation

In my previous blog I discussed the creation of knowledge and adding value through change (innovativeness). The big step forward which is needed for the mining industry is a better understanding of the link between knowledge and innovation.  The innovation process has four characteristics.

1.       Being part of the global world.  Knowledge is everywhere and there is good work being done around the globe.  For example, Europe is not renowned for mining knowledge (although maybe Russia and several of the former Russian States may be exceptions).  Many of the European countries fall in the top quartile for innovativeness and as such frequently have developments of interest here in Australia.  In addition to a number of large equipment companies from Germany which are doing some good work, there are real technology advancements coming out of Europe.  The Vienna Test System which comes from Austria has tremendous application in the Australian mines for operator selection; significant electrical advancements are being made in Germany and tested on draglines in Estonia; etc, etc.  Mines should be grasping knowledge and/or developments from anywhere they might come.  As a primary consideration they should be benchmarking wherever possible.

2.       Innovative individuals and communities.  The mining industry needs innovative people.  I have mentioned it before but the perfect example is the Australian Coal Association Research Program which distributes over $10M annually of the industry’s money for coal mine research.  This program draws some of the smartest and most innovative thinkers into the coal industry research and development arena.  To ACARP’s credit, they do get the whole concept of knowledge development and the link to innovation and have a clear focus on adding value.  AMIRA also plays a vital role for the broader mining industry.  Mines need to build an innovation culture where change is not done for the sake of change but rather to add value.

3.       Systemic Nature.  Being innovative is not something which can be turned on and off.  It is the culture; the way the people think and act.  Some people believe it is difficult being innovative within a large mining company.  This is because they are thinking on too large a scale.  Too often we think that multi-million dollar projects such as Universal Dig and Dump, equipment automation, etc. are required to be innovative.  However, knowledge intensive mining and being innovative can be done on a micro-scale.  Each person can take responsibility for themselves and can follow the path of acquiring, absorbing and applying.  On a micro-scale the operator who, having difficulty loading one bucket ends up with half a load, actively changes their digging for the next cycle and the one after that has applied knowledge. As a summary, each individual being innovative relies on how they are acquiring, absorbing and applying the knowledge which is available.

4.       Customer and user-centric.  This is what I call “bottom line” service.  From the provider’s perspective, knowledge and service provision must be focused on what the user / mine needs.  All too often the mining industry funds work by research groups and consultants, which focuses on the process and how smart the process and people are.  For knowledge to be valuable and to facilitate the innovation process it must be value-based, ie. it must provide bottom-line / profitability improvements for the mines.  The key to this is the person pulling the levers or turning the steering wheel.  This person has the ultimate control over what output is achieved.  Therefore the mine must engage the operator / driver in the optimisation process. 

In the European Innovation Survey, Australia fell in the third quartile.  We are below average in innovativeness, and by industry standards the mining industry is very conservative.  In fact, I could name quite easily those mines in Australia which I consider to be genuinely innovative.  The reasons for this are quite clear and I will address them in my next blog.

Graham Lumley 

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Improving Equipment Performance – Knowledge & Innovation

The two steps in business improvement for any process, including equipment performance, are to gain knowledge (about gaps in performance) and to do something with the knowledge (innovation). 

There are a number of generators of knowledge.

• R&D which needs policy to support R&D and money to do the R&D.  The money attracts smart people to do the R&D.  A really good example of this has been the ACARP program in the Australian coal industry.  $10M+ of funding is available per year and some of the smartest researchers have been attracted to this money.
• Experience from time on the piece of equipment.  The knowledge is gained from the interactions between the people and their environment.  
• Training which is defined in terms of the content and the delivery / instruction generates knowledge for the trainee.
• Information, which is generated from data, becomes knowledge when it is meaningful to the recipient.

Experience happens, data is collected and benchmarks done, training is provided and research is done by various organisations, however the transition to knowledge is not always done well.  Many have said, "If you don’t measure it you can’t improve it", but it is more than this.  If you don’t actively acquire it, absorb it and apply it, you can’t improve it.  Internal knowledge resides in the people and the captured data.  External sources may include trainers, researchers, consultants, market intelligence, etc.    

The effective generation and use of knowledge is being stifled at the majority of Australian mines.  Good management doesn’t just put red lines through a whole heap of budget items.  Good management is about cost optimisation in the short, medium and long term; not necessarily short-term cost minimisation.  Cost optimisation always allows a budget cost (usually relatively small) to become smarter and practice real continuous improvement.  If an organisation wants to stay operating during the difficult times ahead they really need to spend some money to save more.

The expansion of knowledge and the use of knowledge has attracted the attention of many key mine people, however, the further one looks up through the corporate ranks the less appreciation for the value of knowledge is apparent.  Many people in decision-making positions, struggle with grasping something which is not tangible. 

Most Australian mines fail to take the steps to innovation.  Getting a benchmark or a consultant’s report or a mine plan demonstrates that the manager is doing something.  But really, if something practical isn’t done with it, all he/she has done is waste the company’s money in an attempt to make themselves look good and tick their career boxes.  Without taking the step to innovation / change, nothing of value is achieved for the mine.  A culture has developed whereby not taking risks is rewarded.  "If you want to get ahead don’t stuff up".  Add to this the personal issues many Australians have to being wrong and you can see why innovation is so difficult for some mines. 

The easiest way to use knowledge and to add value is through using data to evaluate and understand what is currently happening and to change based on the knowledge of what others around the world are doing.  It is not about the creation of a simple one-page report from the monitor because chances are that it has been written by an IT person with limited knowledge of what is meaningful.  It is about the active creation of meaningful reports and a program of helping the recipients understand and plan to be better.

Gaining Competitive advantage from Data

In this discussion I intend to discuss how the vast amounts of data which are generated on mining equipment can be turned into productivity, profitability and ultimately competitive advantage.   This is what I call “bottom line” services. 

There is a wealth of valuable mining data being produced around the world every day, however, mines are failing to benefit from it as they don’t have the ability to capture and meaningfully apply it.  Through poor management of available data and the loss of personnel, the continuity of information acquired and knowledge applied to run mines efficiently is being broken. If not remedied, this will prove very costly in the long term.

Data by itself is just a mass of numbers - it needs to be analysed and assessed to extract value. However, mines must be wary of subjective analysis which is done for the benefit of another party rather than the mine itself. All too often the mining industry funds work by research groups and consultants which focuses on the process and how smart the process and people are.  For knowledge to be valuable and to facilitate the innovation process it must be value-based, ie. it must provide bottom-line / profitability improvements for the mines.  The key to this is the person pulling the levers or turning the steering wheel.  This person has the ultimate control over what output is achieved.  Therefore the mine must engage the operator / driver in the optimisation process.  To do this they must have an intimate understanding of the information being provided through reporting of performance

The best way to explain this is through a case study. While most mining equipment has loggers generating data (and if your’s don’t then they should) the loggers on draglines produce the most comprehensive data.  A dragline with production and maintenance loggers will have over 2,000,000,000 signals processed into nearly 20,000,000 pieces of data, stored in databases every year for post processing.  (Is it any wonder that mines find themselves swamped by data? )

In this case study, the dragline is real and the results are real.  Most importantly, the lessons to be learnt can be applied to any operation and any piece of equipment.  This dragline historically operated at a production rate better than average.  When the maintenance logger was installed, a program of improving productivity and reducing damage was initiated.  The demand for change came from a range of areas, including, the workforce, technology, economics, competition,  etc.  The Mine Manager assumed the role of “change agent” and sought the support of a range of internal and external people who he perceived could help him.  Not unexpectedly, resistance to change came from individual and organisational sources.  In overcoming the resistance to change, the site focused on education, communication, participation, facilitation, support, and negotiation. 

A key part of this program was delving into the masses of data to provide specific and targeted reports to a range of people across the site.  Remember the word “meaningful”.  This is the key to operators and drivers understanding and changing their actions.  Data must be presented in a meaningful way. Reports included benchmarking, monthly production reports, operator comparisons, individual operator reports, and bucket reports, all of which included comprehensive productivity and maintenance information.  They included tables of data, line graphs, bar graphs, pie charts, and anything else the mine requested to help them understand what they were doing which impacted productivity or maintenance.  Of critical importance was the fact that these reports were followed up with visits from dragline “experts” and trainers who helped all levels on the mine site interpret the reports and develop plans for “change”.  In addition, all operators and supervisors attended off site courses which focused on team and individual understanding of the job they were doing.

The data was used to determine which digging techniques increased damage both from a global and an individual basis (comparisons were made both internally and externally).  Effort was made to identify which operators needed help with productivity or maintenance or both.  During the first 223 days of the program dig rate increased by 15% and boom stress decreased by 25%.  In conclusion, the data and the analysis of it were not the reason improvements were made.  Data was an integral part and improvements would not have been as significant without it.  However, the real impact was the organisational culture which was created. The dragline was changed into a “learning group” with the following characteristics;

·         A shared vision,

·         Old ideas were discarded,

·         The dragline operation was seen as a system of interrelationships,

·         People actually communicated with each other, and

·         Personal interest was less important than organisation interest.

Competitive Advantage for a mine or organisation comes from operating at a higher productivity and lower cost than others.  It should be seen as originating from doing a whole range of actions better than your competition.  On this definition, the dragline studied here has definitely assisted this mine in achieving competitive advantage.    The data was not the reason competitive advantage was gained but rather the most important strategic resource which itself was mined to extract the value.  Change was the mine's most valuable strategic ability and enabled the knowledge from the data to add value to the mine.

Graham Lumley  - CEO of GBI Mining Intelligence

BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Dragline Coach and Training Position Available at GBI.

Do you have dragline experience and looking for a better lifestyle?

·         Flexible work hours

·         Challenging and rewarding career

·         Reporting to HO in Brisbane,  though preferably located in Nth QLD

·         Wage – Generous Casual Daily Rate

·         Employer of Choice, with an excellent work/life balance

·         Work in an environment that embraces the values that have sustained the company since inception – Teamwork, Respect, Innovation and Ethics

GBI Mining Intelligence requires an experienced dragline operative to assist in the delivery of intelligent equipment performance data on mine sites throughout Australia.

GBI as the sole provider of intelligent mining information offers mine managers the unique means to achieve improved productivity and profitability.

Key elements:

·         GBI Mentoring Program

·         Operator Training & Development

·         Operator assessment

Technical Skills & Experience Required:

A minimum of ten years’ experience in the mining industry is preferred. The right person will exude excellent interpersonal and communication skills.
Previous experience in a senior role is also preferred.

Proven client relationship management and project delivery that meets client expectations will be highly regarded.

Working at GBI you will have exposure to a leading multi-national team as well as being a team-player.

For further information regarding this role please contact Lea Andlovec on 07 3147 8300 or email lea.andlovec@gbimining.com  

Please visit our website at www.gbimining.com

Please apply by 26^th Oct 2011. All applications are treated in the strictest of confidence.

Benchmarking mine equipment productivity against industry standards

If I can reiterate what I put in my last blog; worldwide best practice excavator performance is up to 42% higher than average; best practice shovel performance is up to 37% higher than average; best practice trucks are up to 65% better than average; best practice draglines are up to 32% better than average and best practice drills are 282 per cent above average.

So why do mines continue to ignore what others are doing with the same equipment? If the best practice for a 28 CuM class excavator is 23Mt per annum and the average is 13.5Mt, why don’t mines do something about it? Is the $15 million lost from the bottom line of no consequence? The chasm between average and best practice remains partly through ignorance of what best practice is and partly because it is just too difficult for some.

Consequently, many mine engineers and management need excuses for poor performance and comparing their performance against industry standards (benchmarking) is definitely not on the agenda.

“But my operation is different”. It is the standard response when talking about comparing mining equipment. Sure, every operation is different. Some dig deep and others are shallow. Some dig ore and some dig prestrip. Some have hard digging and others soft digging. Some have long hauls and some are short. Comparing with other mines (benchmarking) won’t answer all questions. In fact it will raise quite a few questions which will need to be answered. What can I learn about areas for improvement? What are others achieving which I should be able to do? Many mines are shocked by first time benchmark results and dismiss it through “But my operation is different. We can’t do much better than we are now.” These mines are consigned to mediocrity.

There are many reasons I am given for mines not benchmarking their equipment performance against mining industry standards from mines around the world. You probably can’t come up with an excuse I haven’t heard. If you are looking for an excuse then let me help you out.

• The Stock Exchanges – don’t the mines already do this?
• Executive Management and Boards of Directors – of course our mines do that…….don’t they? We have enough mines to have a reflection of equipment capability somewhere in our company………..don’t we?
• Mine Managers – don’t let the Executive Management and the Board of Directors know how we are really performing; just don’t take the risk. Emphasise how “we are different” and a comparison with others is not helpful.
• Superintendents and Engineers – we are doing better than last year so we only compare against last year – that is our only real measure of how we are going.
• Consultants – we don’t have a wide range of actual performance data so we don’t use industry standards for equipment in our mine plans; besides if we use real rates, the client may not be happy with the result.

Productivity is more than having the right equipment and processes. It is about the people. It is about you. You can continue to be mediocre – just keep doing what you have always done. But the day is coming soon where this industry will no longer accept mediocrity. My crystal ball says that we have entered another extended period which will see mining companies struggling with low prices not too long from now. In fact my crystal ball says that the next boom won’t start before 2023. The last extended downturn from the mid 1980’s to around 2002 was characterised by mines improving output per person, (ie. getting rid of excess people). People are now pretty thin on the ground and the next extended downturn, which we entered in 2009, will be characterised by those mines and companies which survive through improvements in equipment efficiency. If you want to survive, you won’t have a choice. You can’t keep cutting employee numbers to give an illusion of improved efficiency. Mines will have to stop making excuses and follow the lead from that group of mines which actively compare themselves against others and use the knowledge to actively implement change.

I would like to recount the experience of a truck and loader operation here in Australia. They were poor; very poor. A new manager stepped in and refused to accept the way the fleets were being run. They contracted a trainer to help them improve and they did. In fact they doubled annual output. A new pit layout, a new focus on utilisation, new dippers, etc. We then benchmarked their performance against best practice around the world. They were amazed when they found that their equipment was still on average 38% below best practice. That was five years ago and we have worked with them since then. In 2009 this mine achieved best practice across their fleets.

In summary, it is up to you. There is a lot of knowledge out there so acquire it, absorb it and apply it.

Graham Lumley - CEO GBI Mining
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ

Productivity inefficiencies in the Australian mining industry

Many mine operators believe that 21st century open cut mining in Australia is a mature and efficient exercise.  These people are wrong!  It might be mature but it is certainly nowhere near as efficient as it should be.  This is a fact supported by our 6,000 years of mining equipment data.  This is despite significant changes achieved over the last 20 years which have come about through the reduction of restrictive work practices and structural change in the industry. 

Shareholders and Boards of Directors are been informed that Australian open cuts are now among the most efficient in the world.  The bottom line is that the average mine or contractor is not doing the right thing by their shareholders and utilising this very expensive equipment at anything like best practice productivity.   Mine operators have cut worker numbers substantially which has created the illusion of efficiency through improved output per employee but the average mine is currently underperforming across their equipment fleets by 20-50 per cent depending on the equipment.  Best practice is achievable and is what the best operators are actually achieving worldwide, not some fictitious and unachievable number.

You start to get a picture of what this industry is doing when you consider a 500 tonne class excavator, which on average under-performs best practice by 43%, is actually costing the mine in lost potential margin upwards of $50 million per year for one fleet.

A brief look at the last 50 years provides an interesting insight into the development of the current situation.  Until the early 21^st century, the mining industry, with the exception of a few isolated commodities over short periods of time, provided little in the way of profitability to its owners.  During the 1960s and 1970s, an industry-wide culture of industrial deadlock and regulatory institutions that quarantined Australian operations from global competitive pressures made workplace reform very difficult. The wealth generated from mining operations provided relatively little for the shareholders.  Australia’s mining companies went through difficult times described by Leigh Clifford as ‘profitless prosperity’.

By the mid-1980s, parts of the Australian mining industry started to respond to the opportunities and threats of globalisation.  For example, the experience at Robe River in Western Australia where Peko Wallsend terminated the workforce in 1986 due to restrictive work practices was one of the first attempts to address restrictive work practices.  They achieved over 200 per cent improvement in output per person.  More than 10 years later Rio Tinto eliminated similar restrictive work practices in their coal mines. The coal mines in the Hunter Valley increased output per employee by over 100 per cent.  Most of this was simply less people shifting the same amount in the same inefficient ways that they had always done; they just had less people sitting around watching.  But what the mines did achieve was to get Executive Management, Boards of Directors and shareholders off their backs about efficiency.

So how do mines in 2011 perform with respect to large equipment productivity?  Best practice for a piece of mining equipment is defined as the 95^th percentile of annual output / tonne of rated capacity.  This means that one in 20 similar pieces of equipment achieve this level of performance.  In excavators best practice is 42 per cent higher than average and rope shovels the difference is 37 per cent.  In draglines the average difference between best practice and average is 32 per cent.  Best practice drills are 282 per cent above average.  Drills are an interesting case.  There is a group of South American mines which drill 200 per cent more metres than the best practice in Australia.

The losses incurred by the Australian mining industry due to inefficient use of expensive equipment are large and are costing shareholders a lot of money.


Blog Written By:
Graham Lumley - CEO GBI Mining Intelligence
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ