Insight

Issue 2

Beneath the surface

Improving project performance

Welcome to the second issue of our quarterly update of ideas and insights for the mining and metals sector. In this issue we look at tools and approaches from outside our industry relevant for mining companies and members of their supply chains.
The use of Key Performance Indicators (KPIs) is far from new, but their usefulness can vary we have seen projects where the wrong KPIs produce information that does not help management take decisions; we also know that having too many KPIs can shift the focus from successful delivery of a project to the achievement of specific indicators.

Ideas for the mining and metals sector

Investment is required in research, manufacturing and delivery of sustainable Making KPIs work for you solutions to safeguard the future of the UK.

John Gravel on site in Peru

This article outlines some of the most common KPIs we see, and notes some of the factors to take into account in applying them. It is part of a much larger piece of work compiling insights and experience from projects all over the world if you would like more information about how KPIs can help you get the most from a project please get in touch. Our second article looks at the application of Lean principles in the delivery of mining projects. Although it has its roots in car manufacturing, tracing its heritage from Henry Ford via Toyota, there are practical similarities between mining and manufacturing. Each can use Lean techniques to manage extensive supply chains, focus on safety, and juggle multiple complex processes while Leans ability to address features unique to mining has made it an increasingly useful tool in our industry. Read on to see how we have helped some of our clients use Lean to improve their processes. I hope you enjoy this issue if you have any feedback or would like to know more, please do let me know. John Gravel Vice-President

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your assets. do each day.

Measuring performance to ensure successful project delivery and continuous improvement in the way you manage and develop

Lean thinking in mining

Lean thinking is not purely about cost saving. It focuses on working smarter to reduce or eliminate the non-value-adding work people

For further information please visit

www.turnerandtownsend.com

Beneath the surface Issue 2

Key Performance Indicators

Using performance data to improve your project
No project meets its objectives by chance, and careful performance management is crucial throughout. We rarely come up against projects where no KPIs are in place, but sophisticated organisations are now looking more carefully at how they measure performance to ensure both the successful delivery of individual projects and continuous improvement in the way they manage and develop their assets.

Turner & Townsend compiles KPIs from projects around the world to help clients ensure they are measuring the right things, generating information they can use, and benchmarking against international best practice. While specific KPIs on one project may not be suitable for another, there is a reasonably consistent set of KPIs that organisations can use to ensure their projects are delivering: 1. Health and safety All the mining companies we work with are making significant inroads into improving the health and safety of their workforces and stakeholders now routinely monitor performance in this area. Performance indicators, such as accidents, are now monitored as standard and increasingly we use indicators such as near miss data to allow more proactive management of performance. However, the most common root cause of accidents at work is the behaviour of people. Adding KPIs that allow management to understand, monitor and address project-specific human factors is key to safely delivering a project. The implications of this should not be underestimated: widely reported figures from the UK, US and Australia suggest that on a US$1 billion programme costs can typically be increased by US$60 million through health and safety-related losses more where safety culture is not fully advanced and working environments are difficult. 2. Environmental Most countries have some form of legislation to control the environmental impacts of mining operations and mine closures. Many systems are in place for setting and tracking KPIs against such legislation, covering such impacts as environmental pollution and waste management. However, throughout the world wider sustainability controls are being applied to mining operations, and we are developing project-specific KPIs to demonstrate to stakeholders that the mining operation is complying with these wider requirements.

For example: Funding Institutions the worlds major banks are increasingly applying the Equator Principles which establish baseline sustainability criteria for major projects that they fund The International Finance Corporation (IFC) uses environmental and social screening criteria to categorise the magnitude of social and environmental impacts The International Council on Mining and Metals (ICCM) has 10 Sustainability Principles with which members must comply the worlds largest mining companies are members of the ICMM. 3. Performance Performance is a core measurement requirement for all projects, as it relates to both time and cost measurement and can be used to forecast outturn cost and project milestone dates. Used well, these measurements can warn the project team about issues in sufficient time to bring the project back on track. These KPIs are usually best read as a group at high level, with the ability to drill down to understand specific issues. Programme/time most organisations require a project programme so they can impose specific milestones and stage constraints. If there are significant changes to the project then the programme can be modified and updated as the project progresses. Cost/budget all projects have a budgeted cost, which is distributed throughout the project life cycle, enabling the client to arrange finance. Bringing the programme and cost forecast together gives the ability to monitor productivity. Performance KPIs most commonly Schedule Performance Index (SPI) and Cost Performance Index (CPI), which generally rely on the project having a viable cost-loaded programme at the start of the project that is monitored and maintained.

Quantity/man-hours this focuses on design approval, turnaround times and production achievement. Suggested KPIs include: average time taken to respond to and close out requests for information average drawing turnaround time from formal submission of a drawing until its approval drawing approval rating the number of drawings at various levels of approval design management a comparison of the number of hours worked against the number of drawings issued for approval production targets these have been successfully used to measure completion of a specific work stream such as a port facility or process plant expansion. Over a large project or programme these KPIs will facilitate control and measurement of progress and when viewed with the CPI and SPI provide a more balanced view of the project status than just viewing the KPI in isolation. 4. Change All well managed projects employ a change control process to track changes to the design, cost, schedule, quality or variation from the specification. While there is no industry benchmark for this KPI, our experience suggests a five percent increase on the contract sum would be an aggressive but achievable and desirable target.

5. Risk and issues Most projects use a risk register, usually dictated by the client organisation. The risks on a risk register are generally scored and given a simple colour rating. Some projects produce probability impact grids alone these are of limited use but over the course of a project they can demonstrate that risks are being effectively mitigated. Simulations generate useful KPIs from the risk register, demonstrating the likely impact of changes and/or spend. 6. Quality This is often measured qualitatively by looking at the output of the project without much regard to the quality of inputs. The measurement of quality for a project usually relates back to the project objectives and the expectations of the level of quality. Measuring quality is a challenge due to the subjective nature of the topic, however by thinking about the question from the outset, businesses with multisite operations can generate significant insight from their stakeholders about the success of a project. 7. Team performance This category includes measures of behaviour and other people issues. Such qualitative measures can be hard to put in place, however they can yield important results that make a tremendous difference to the working environment and outturn of a project by giving insights into contractor and subcontractor performance, morale, teamwork and individual behaviour. Large data samples are important to identify trends and demonstrate the impartiality of the base data.

Lean thinking in mining

Lean thinking may have its roots in manufacturing, but the principles have been significantly improving projects for mining organisations over the past decade. It focuses on implementing processes that ensure the right things get to the right place at the right time while minimising waste and retaining the flexibility to adapt to new circumstances.
Lean interventions take into account features unique to mining such as inherent production push due to the continuous operation of a smelter/refinery, variability of raw materials as well as common manufacturing/mining features such as the demand for standard work practices, the reliance on extensive supply chains and the focus on safety. Lean is not purely about cost saving; instead, it focuses on working smarter to reduce or eliminate the nonvalue-adding work people do each day. Here we outline some recent projects where our consultants have helped clients use Lean thinking to save time, money and effort and empower their workforce to increase productivity, efficiency and morale. As these examples show, Lean thinking is not complex but requires detailed understanding of the process. Improved order delivery times from stores The issue: The lead time for a department from placing a requisition to stores to receiving the parts was up to five days longer than the planned maximum two days. Reasons included 22 percent of the items being out of stock, multiple sorting and triple counting of stock, batching of reservations and a single issue report each day. As part of the countermeasures, the project team introduced labelled containers and pallets per destination to avoid re-sorting on delivery as well as delivery to the wrong drop points. This reduced average dispatch and delivery times from 2.9 days to 1 day. Minimum and maximum threshold stock levels were defined to facilitate optimum reordering.

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making the difference

Beneath the surface Issue 2

Lean thinking in mining

Optimised planned maintenance at the workshop The issue: Only 80 percent of the scheduled tasks were being completed daily, resulting in a perpetual backlog. Analysis showed that there was inconsistent work allocation between the maintenance staff with some completing ten times more than others in the same time. Plan to completion reports were only available two weeks after the event which made tracking difficult. A new planning process was proposed including features such as: daily Job Card issue and return to monitor work status and completion of scheduled tasks bi-weekly maintenance plan reviews a workload board whereby every maintenance worker was preloaded according to jobs and not sections to address the workload imbalance a schedule board with priorities. The countermeasures ensured 60 percent time allocation to planned maintenance and 40 percent to reactive maintenance. Improved shift change The issue: Production was scheduled to commence at 07h45 but the actual start-up time averaged 08h07. These 22 minutes resulted in a loss of 264 tons per day. Analysis established that blasting preparation was the major cause of all the delays; 67 percent of all late start-ups were a direct result of late blasting. The blasting delay reasons included damage to wiring by loaders, incorrect wiring connections due to human error, inadequate system checks and insufficient preventative maintenance of blasting fans. We also found complex and unclear procedures that were not easy to follow, while not all critical data was captured and analysed. Countermeasures developed by the team included: clear operating procedures for all activities during the shift changeover period as well as ensuring ready access to all users of visual control standards, control charts etc. Included in the Standard Operating Procedures (SOPs) was that wiring was to be routed at a height clearing the travel path of the loader. Countermeasures for the immediate future included: installing an electronic closed circuit tester to be monitored by the control room

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a scheduled maintenance programme for blasting fans would be implemented. Annual health assessments The issue: All people working at the mine are required to undergo an annual medical examination. They were spending as much as five hours in the clinic, most of which was spent waiting for the next process. Some of the problems identified were that all patients arrived at the clinic at 05h00. The radiographer and the doctor only arrived at 07h00 and 08h00 respectively. Completion of the form at reception took over 25 minutes and there was no defined sequence followed by patients for the various procedures. The project team focused on the activities occurring from the time the patient entered the clinic until they were issued with a health certificate, for which they designed a process flow and conducted a flow simulation. It was established that it was possible for patients to leave the clinic within 69 minutes of entering a target which was then achieved by moves including reorganisation of seating to facilitate flow, redesign of the form at reception and introducing standardised procedures. HR recruitment process The issue: Recruitment of C-band and higher staff averaged 83 days, with a maximum of 446 days, with significant cost and time implications to production. Analysis showed that documentation pertaining to specific positions spent considerable time waiting for approval at various stages in the process. The approval process was revised to reduce the queuing time and to have some activities happening concurrently rather than sequentially. Countermeasures included: making resignation approval the trigger for commencing the recruitment process scheduling candidate review and shortlisting meeting prior to application closing date a telephonic interview questionnaire drafted before closing date of advert the candidates personal information to be sent to HR during their notice period to avoid delays in signing on

and induction.
These measures reduced the average recruitment period by 12 days.

For more information about the issues discussed in this newsletter please contact John Gravel on: john.gravel@turntown.com or call: +1 415 489 1509 or visit our website: www.turnerandtownsend.com

Turner & Townsend plc March 2011