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In an increasingly volatile global market, what can mining companies do to improve operations, become cost efficient and agile, and maximize value across their business?
As the uncertainty in the global economy continues to impact the demand for metals and mining products and their prices, mining companies are under pressure to achieve speed to market and get things right the first time. For companies trying to improve business performance in an ever-volatile environment, the challenge lies in rethinking and addressing a range of issues across the business with an eye toward maximizing value.
This Accenture Point of View argues that for mining companies, waiting and watching while markets become less volatile is no longer an option. Instead, mining companies can improve their ability to respond to market conditions and increase value in an ever-volatile environment by considering three actions to take: focus on core, optimize core operations and address capital inefficiencies of core activities. Those that take positive steps now to be cost efficient and agile stand to create a foundation for sustained high performance.
Ramping up or slowing down operations in times of uncertainty—particularly in a downturn—has become a major challenge for most mining companies. It can take months before output is realized, and by the time a product reaches the customer, the price can not only fluctuate but also fall precipitously. The use of analytics in the industry is still low and immature, resulting in lagging indicators and disconnect between corporate decision makers and local operations. These conditions constrain a company’s ability to understand its current operations, distinguish market signals, react and make timely decisions, and respond with agility.
Accenture believes that to maximize value in a volatile environment, mining companies must:
Focus on core: To realize value in weak markets, companies need to evaluate and determine core activities and functions and outsource non-core ones to a business partner, increasing its ability to focus on core competencies, speed up time to market and reduce costs.
Optimize core operations: Miners can pull various levers—such as mature analytical planning and management technology solutions, centralizing data-primary activities through the control room, using fly in, fly out options to maximize labor efficiencies, and so on—to optimize core operations and create greater value.
Address capital inefficiencies of core activities: To increase capital efficiency, miners can adopt a more financial view of measuring efficiency from the perspective of both equipment and people. Using benchmarks on asset capital, a component useful to validate a company’s capital framework to industry peers, can be useful. Optimizing the use of existing talent is another opportunity area for greater capital efficiency.
Accenture’s experience with mining companies around the world has shown that by improving their ability to make better operational decisions, miners can achieve the following benefits and ultimately drive sustainable high performance:
Faster planning and the ability to be more predictive.
The ability to better consider a range of operational issues, which helps to better identify problems, possible outcomes and new opportunities.
Improved cost management and management of capital allocations; more strategic use of capital.
Improved scheduling, closer to just-in-time delivery.
The ability to deliver more of what the market wants and be less exposed to commodity volatility.
Improved overall timing to realize benefits sooner by being in a better position to ramp up quickly when needed.
Amy Callahan is the managing director of Accenture Capital Projects Services and is based in Denver.
Larry Oglesby is managing director, Process and Innovation Performance, Accenture Management Consulting.
Elliott Segarra is a senior manager in Accenture Management Consulting.
Nathalie Viens is a senior manager in Accenture Management Consulting.
Harvey Wilson is a senior manager in Accenture Management Consulting.
November 13, 2013
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