I have
introduced a number of broad-based productivity issues over the last few
blogs. We will get on to some more specific issues but in this piece I
want to introduce another broad issue. What is the best time to invest in
productivity enhancement?
The two key
areas to productivity enhancement are during the R&D / equipment selection
phase and during the post-commissioning phase. That is, get the right
equipment and optimise its use.
To understand
the interaction between mining and knowledge I will return to the presentation
by Jari Kuusisto presented to the Smart Innovation Festival in Brisbane in May
2008. Kuusisto presented the curve of ROR vs Product Life Cycle. I
have added the risk and cost benefit to this to provide the following plot.
The product
life cycle can be described from the mine or the supplier’s perspective.
In the plot here it is viewed from the mine’s perspective. The mine
follows a process of Correct Selection – Order placement – Commissioning –
Equipment Enhancement.
The rate of
return on money invested is highest during the development / selection stage of
the product and during the after-sales service / equipment enhancement
phase. However, the risk on the investment is highest early in the
process and reduces further after the product has been delivered.
When these two plots are combined it can be easily seen that the cost-benefit
(return / risk) is moderate at the start of the process (during R&D /
selection) and highest after delivery/commissioning (during the process of
“asset optimisation” or “capacity utilisation”). It is no coincidence
that the application of knowledge is needed most during these two
sections. It can therefore be deduced that the input of knowledge is
related to cost benefit. It is also interesting to note that the highest
cost benefit occurs when the knowledge is applied in the after-delivery phase
of equipment optimisation which is largely process related.
If one looks
at this from the perspective of a supplier the product life cycle
becomes: R&D, Collect Orders – Commissioning – After Sales Service.
Interestingly, the plot follows exactly the same form. For the equipment
supplier their greatest return comes in after-sales service. This is a
really interesting observation because during the boom I had an almost
impossible job getting suppliers to listen to anything to do with knowledge and
after-sales support. Suppliers apparently were able to sell all their
equipment and the concept of using after-sales service and knowledge as a means
of helping mines use their equipment better and as a point of strategic
advantage wasn’t considered. This has clearly changed. I have had a
number of companies approach us about using the data and knowledge as a key
element in their marketing strategy. During the boom nobody seemed to
care that there was one brand of truck which was 84% more efficient than the
worst. Funny isn’t it? During the boom if it had wheels and carried
dirt it was good enough. Now a lot of mining people don’t seem to want to
take the risk that they will buy the worst truck and some suppliers seem
motivated to use data to help them be as good as their equipment allows them to
be on the mine sites.
It seems
prudent for suppliers to understand the words of S. Downton on
ecustomerworld.com,
Delivering high levels of
customer satisfaction through a well-managed service operation can increase loyalty,
and thereby sales, by as much as 8 times - greatly enhancing the value of the
business. Successful manufactures increasingly focus on their customers' total
lifecycle by investing in their service management business to maximise the
value captured throughout the product lifecycle. This means that the product
sale is only a small part of the overall value during the complete product
lifecycle and is only the start of the customer relationship.
Support for
my belief that the world of suppliers has changed came late last year when we
found a bucket manual which I had written for a mine to optimise the
performance of the bucket they had just purchased, had been blatantly
plagiarised by the OEM and presented to other mines purchasing their product
under their name and logo. This supplier has seen the value of knowledge
(particularly linking the knowledge to the company) and has seen it as
providing strategic advantage for them.
Graham Lumley
BE(Min)Hons, MBA, DBA, FAUSIMM(CP), MMICA, MAICD, RPEQ
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