Going for the Gold

Last week I was in a consultant "shop-talk" session comparing notes on how to identify and track financial benefits that show in a clients’ monthly financial reports. Reduction of manpower costs has been the core of those calculations, literally, for decades. The drill is well known: measure the work in manhours, manload it, and “right-size” the workforce. It’s time-tested, dependable, and highly visible in a client’s financial reports. It is also very limited.

Recently I helped on the business analysis of a maintenance operation in a gold mine. The proposed financial benefits were based on this, classic, method. Increase manpower utilization and generate the same volume with fewer people. For discussion sake, that method resulted in X dollars of benefits with an ROI of 2 to 1 within six months.

However, if one could use that “found” manpower to improve equipment availability, a new opportunity presents itself. Where clients can sell any additional product, one can increase equipment availability using TPM methods. One quick result method is Zero Breakdown. That changes the benefit base from reduced labor costs to increased product gross margins. For the above analysis, that increases the dollar benefit ten-fold to 10X dollars and an ROI of 20 to 1. That was based, literally, on the value of the additional gold mined.

There has been reluctance to use this approach in some quarters. This is likely due to unfamiliarity with the predictability of that specific TPM program. True, it is more complex upgrading organizational skill sets. In particular, line operators’ methods running the production equipment.

Where operating procedures are not clearly defined and/or organizational discipline does not insist on procedural compliance, poor operating practices have a detrimental effect on the OEE factor Performance Efficiency. You will see this in organizations where the best operators are believed to have a “special touch”, constantly changing settings, cajoling their equipment to increase performance.

The first step of Zero Breakdown is to stabilize Mean Time Between Failures, restore unchecked deterioration, and prevent accelerated deterioration caused by operators. The last point is critical to sustaining performance improvement due to fixing the equipment. It is dependent on changing the culture from where operators are artisans/heroes changing settings, to where the need to change settings is a red flag triggering root cause analysis. Nelson’s Funnel is an effective tool for convincing individuals and the organization to change behaviors operating production equipment.

In summary, you can increase a project's ROI up to ten-fold where markets will take all additional product produced. The maintenance crews can restore equipment to near-factory conditions. Then, to sustain the condition, assure that equipment operators know what to do when equipment cannot hold the proscribed, line-balanced settings. Conduct line audits checking component settings. Generate root cause analysis work orders on lines that are not on the settings established by line balancing.