The Mining Industry’s Production Crisis
According to Dr. Bernd Elser, Accenture’s Global Lead for Natural Resources, mining companies have fallen short of their production targets by 2.6% annually over the past five years, resulting in a staggering $67 billion in lost revenue. Australian miners have been the worst performers in this regard.
Missing forecasted production is not an exception
This issue of unpredictable production in the mining industry creates significant challenges. It undermines investor confidence, often becoming a focal point in investor Q&As. Additionally, it leads to lost output and profit each year, which in turn impacts cash flow and market valuations. Most importantly, it stifles opportunities for increased mining production, limiting growth and efficiency improvements. To address these problems, mining companies must undergo a structured transformation—reinventing their planning, asset management, and entire supply chain processes. This requires developing new capabilities, adapting organizational structures and roles, and investing in advanced analytics and technology. For leading mining companies, the financial potential of improving production predictability is substantial, with gains reaching billions of dollars. Hence, the necessary investment and operational changes are well worth the effort. By addressing the root causes and adopting recommended strategies, companies can improve predictability, reduce revenue losses, and enhance their potential for a successful net-zero transition, paving the way for a greener and more profitable future.
Why Mining Companies Struggle to Meet Production Targets
Several factors contribute to production shortfalls, including gaps in planning and operational challenges. These include geological variability, lower ore quality, unplanned downtime, a shortage of skilled labor, and logistical constraints. By identifying and addressing these root causes, mining companies can reduce revenue shortfalls and work towards achieving net-zero goals.
One critical issue in planning is the insufficient resolution or level of detail in the production plan. This can be addressed by implementing more integrated and detailed planning processes. Performance issues related to capacity constraints can also be mitigated through better planning integration across all levels, from the “top floor to the shop floor.” These challenges can be tackled through a targeted, data-driven approach focused on action and analytics.
Data-Driven Strategies for Improving Mining Production
The first step in addressing these challenges is to analyze both data and operations to assess how well planning systems and operational processes align. This involves examining the integration between IT and operational technology (OT), as well as the company’s ability to manage and forecast its supply chain effectively. By conducting a detailed forensic analysis, companies can uncover the root causes and identify opportunities for improvement.
From this analysis, a solution sprint is developed, focusing on creating a list of actionable, implementation-ready solutions along with the necessary investment cases. Each solution will outline its benefits, required capital expenditure (capex), and the resources needed for implementation over six to ten weeks. Through a value-driven implementation and change management approach, measurable improvements can be realized within three to twelve months. This transformation will require adopting new technologies, shifting mindsets, evolving roles, and continuously tracking progress. Dr. Elser suggests that by addressing these issues, companies can reduce the typical 2.6% production target miss by 1 to 2% within a year.
Increased Mining Output through Planning and Operations
- Insufficient Planning Detail
More detailed and planning integration is essential, from high-level management down to the operational floor. The mine plan should drive workforce management and ERP business functions by aligning production, maintenance, and construction processes with broader business functions.
A fully connected system enables planning decisions to flow down to individual workers while real-time data and analytics provide feedback to management. This level of visibility ensures that labor shortages and capacity bottlenecks can be proactively addressed, ultimately leading to increased mining production. - Labor Shortages
Workforce efficiency is not just about filling positions; it’s about ensuring proficiency. Recruitment efforts should focus on targeted hiring while automation can supplement gaps in the labor force. However, success in these areas also depends on a structured training and proficiency validation system that ensures workers have the right skills and capabilities to maximize productivity and increase production output. - Capacity Bottlenecks
Integrated planning and scheduling are critical to avoiding bottlenecks. By implementing AI-driven forecasting tools and detailed resource allocation, companies can anticipate operational constraints before they occur. Having a workforce that is not only present but proficient ensures that constraints are handled efficiently and that production goals are met consistently. - Insufficient Scheduling
Scheduling inefficiencies arise when the workforce management system does not account for proficiency levels at the right time. A proficiency-based workforce system ensures that employees are scheduled based on validated competencies, reducing inefficiencies and increasing mining production.
Proficiency Over Competency: Building a Workforce That Delivers
A workforce management system focused on proficiency is necessary to ensure that employees not only meet basic competency requirements but also achieve operational excellence. This system should be seamlessly integrated with mine planning, HR recruitment, onboarding, and continuous development programs.
Incomplete teams and unverified skill sets account for up to 20% of lost productivity. Instead of simply filling roles, companies must ensure that their workforce has both the required skills and real-world proficiency to execute tasks effectively. Workforce gaps often stem from inadequate visibility into skill levels, leading to teams that lack the required expertise for optimal performance, ultimately reducing mining production potential.
|
Problem |
Solution |
| Lack of an end-to-end process for managing workforce proficiency | Real-time visibility into workforce skills, training status, and operational readiness |
| Incomplete Teams resulting in 12% to 17% productivity loss | Automated systems for managing high-turnover workforces, integrating remote onboarding and skill verification |
| Wrong skills or missing competencies and proficiencies causing an additional 10% to 20% productivity loss | A practical assessment framework that validates hands-on proficiency before employees begin their shifts |
The Financial Impact of Workforce Effectiveness
With the average mine worker earning $125K per annum and 30% additional costs bringing the total to $162K, a 12% productivity loss for a mine with 1,000 workers translates to $19 million per year in lost revenue. Additionally, unnecessary administrative resources due to a lack of automation increase costs by 30%, leading to further inefficiencies and last-minute operational issues.
To truly transform operational performance, mining companies need a comprehensive workforce proficiency solution that integrates with mine planning, workforce management, and real-time skill tracking. By focusing on validated skill sets and automation, businesses can eliminate inefficiencies, reduce downtime, and improve overall productivity.
The right workforce solution exists. Contact Tutis (hello@tutis.com.au) today to discover how an integrated, proficiency-based workforce management system can help your company close the production gap and drive sustainable profitability.